Articles
We Need a New Barometer Besides Credit Scores
I'll admit it. I don't have a very good credit score. Most people develop bad credit from failing to pay credit card bills or make mortgage...
04.08.09
This chart shows how credit scores are calculated.Sure, there are some necessary items-cars, houses-that must be bought on credit (though, if everyone refused to buy them at prices that required credit, trust me, the prices would start coming down. Perhaps you've shopped for a house in Detroit recently?), so ability to pay back a loan is something that we need to calculate. But shouldn't cash on hand and income be much better barometers of that ability than the fact that you have, in the past, been forced to borrow money for other things you couldn't afford-even if you were able to pay that money back? To put it another way, a person with no credit should be a person with perfect credit.So, for what it's worth, I'd like to call for a change in the way credit scores are calculated and how much they are relied upon. The idea that being a fully functioning member of society requires you to live a life of borrowed cash is utterly wrongheaded and doesn't enforce the kind of values we need to turn this economy around and make sure this doesn't happen again.