The Hypocrisy of Credit Scores

In light of us pouring billions of dollars into the banks, so they can keep buying corporate jets and eventually ask for another bailout when they can’t collect on their moronic loans that they have written, I would like to take a look at the utterly stupid and hypocritical nonsense known as credit scoring.

I am not going to try to explain all the mumbo jumbo complexity of credit scores, but the hypocrisy part of this story is pretty simple. In theory the credit scoring system is supposed to keep banks from lending money to folks who can not pay it back. It supposed to be a measure of how credit worthy a person is. Instead, banks use it to charge a higher interest rate to folks who have had credit mishaps. In other words, the banks have said, “if you have financial problems, sure we’ll lend you the money, but we’ll charge you higher interest, and variable rates, that will actually make it more likely that you can not pay it back. Look at me. My name is jackass banker.”

A bank should have every right to decide HOW MUCH money they want to lend you, but why should they be able to penalize folks with higher interests rates? This is exactly the kind of process that has led to all these foreclosures. Am I right or am I right?

How about while we are bailing these jerks out, we reform this whole bogus system so that everyone gets a fair shot at a decent loan that they can afford to pay back?

  • M.Uila

    Am I mistaken or is USURY not explicitly forbidden in the Bible?? I know it is in the Koran. Godless heathens.

    Babylon your throne gone down, gone down…

  • M.Uila

    You ain’t a citizen, you a statistic.

    via Kevin Drum, here’s a timely story that’s making news:

    In recent months, American Express has gone far beyond simply checking your credit score and making sure you pay on time. The company has been looking at home prices in your area, the type of mortgage lender you’re using and whether small-business card customers work in an industry under siege. It has also been looking at how you spend your money, searching for patterns or similarities to other customers who have trouble paying their bills.

    In some instances, if it didn’t like what it was seeing, the company has cut customer credit lines. It laid out this logic in letters that infuriated many of the cardholders who received them. “Other customers who have used their card at establishments where you recently shopped,” one of those letters said, “have a poor repayment history with American Express.”

    This story was effectively broken by this guy, who had his credit limit slashed through no fault of his own, which in turn caused a hit to his credit score, which in turn jacked up the cost of his mortgage by $14000… they interviewed him last week on Good Morning America and other outlets have picked it up. Here’s that story and video, check it out.

  • Madman

    Rolling over ~3k owed on a used car into a new car loan at a really low interest rate turned out to be one of my dumbest moves (lately). My homeowners and car insurance policies went up by about a hundred bucks a year for 2 years until I paid down the ‘upside down’ loan. As we say in Jersey, the credit industry can definitely ‘eat a bowl of dicks’. Another favorite of mine that still, to this day, reduces my credit rating, is that I don’t own more credit cards. Yes, they reduce my score because I only have one credit card with a ~50k limit. Can someone tell me why I’m a greater risk because I don’t have more cards in my wallet? Who needs more than 50k a month of credit? I guess I don’t buy enough crap at Walmart…this story makes me want to go off the grid…if only my bank didn’t charge $10 for every ATM withdrawal…