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Thursday May 26th 2022

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What’s Your Score?

By MARY ELLEN KALUZA https://www.lssmn.org/financialcounseling/blog/credit-credit-report/build-and-improve-your-credit-score Americans are obsessed with their credit score - checking it daily, paying for apps, even sending screenshots to potential mothers-in-law. The score is a source of pride and boasting. It can also be a source of shame and low self-esteem. It feels like that 3-digit number defines who we are. Have a good score? You're golden. Have a distressed score? You're tarnished.  Your credit score is based on information in your credit reports. Essentially it is your grade on what has been reported. That grade will determine if you can rent or buy a home, get a phone plan, get a job or promotion, have a decent interest rate on your car loan, how much you pay for insurance, and who will marry you. I tell my daughter she doesn't marry anyone until I see their credit report. Mostly I mean it as a joke, but one partner's poor credit score can hold the couple back from pursuing goals. It is not a joke that life is hard and expensive with a low credit score.  The whole idea of buying and selling information about potential borrowers' creditworthiness goes back to the late 1800's. The score we all know and love or hate ”“ FICO ”“ came into widespread use quite recently in the early 1990's when the practice of risk-based lending, charging higher interest if the borrower was deemed a higher risk, took firm hold in the lending world. Theoretically, lending decisions based on the score are made without interference of personal biases.  The scoring system eliminated some, certainly not all, of the unfairness and prejudice that goes into a decision to extend credit or not. The score does not tell the backstory ”“ was there a job loss? An illness? Death in the family? Divorce? Youthful ignorance? And, it does not address the persistent inequities of colonization and slavery that give great advantages to some and rob others [...]

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