Friday, September 24, 2010

Re: Should it be illegal to have bad credit?

This is just a response to reallybadcredit on Twitter. The tweet was actually aimed at someone else, but I felt rather compelled to respond to this statement. Bad credit should not be illegal, per se. The issuance of credit in aims to malafactor the recipient should be made illegal. A lot of people I know are actually responsible with their credit cards and have excellent scores and some people I know cannot even touch a card for seven years.

Let's analyze the two: one person is responsible and is mature with their credit. They have been educated on what comes from having bad credit and do everything in their power to advance their score. Kudos to them, but now let's talk about the other side. People who often have bad credit are often inexperienced with using a credit card. And there are companies that do not mind putting these people in debt due to a lack of education. It is not like they choose bad credit. American society is known for being the populace of debt Mainly it is due to the lack of financial  education and here's why:

 The average adult carries  around two to three credit cards and do not leave those accountss open for more than six months. This is a sure fire way to damage your FICO credit score. They also do not dispute any bills and have companies like Chase talk them to the cleaners. Often in college, there will be recruiters that say, "Sign up for XYZ credit card and you'll get a free shirt. You can even through the card away afterwards". They often take advantage of people wanting free stuff. Also most people do not use online free credit score review sites like . They are totally in the dark when suddenly  they find out that 8 credit cards have been opened in his of her name. Also people who do not pay within 28 days are hit with hefty interest rates. How hefty? An "average score" credit card can charge a person up to 28% for a payment past the grace period. Is this truely fair? No. But they did sign that contract, so they are forced to grin and bear it. Often times, credit cards are written in legalese or financialese. Meaning, you you have to understand the jargon of finance and law in order to truely read between the lines. And  there is a percentage of the population in America, that completely does not understand how to read. Illitaracy rates used to range around 70%. That's 3 in 10 Americans that do not understand either credit card or cell phone contracts.

That means that probably most people that are in the bad credit range are either a) there because of their own faults or b) do not understand their contracts whatsoever nor do they understand what methods can be used to research their credit. Credit Karma is a good site for Credit Reports and is good for researching interest rates and credit card rates as well as mortgage rates. But getting back to topic, the issuance of credit to an mal-educated populace should be made completely illegal. While I do not really advocate Socialism, I do see the need to provide increased credit card regulation in the United States. Creditors do not really consider the person's overall social stance nor literacy rate of the contractee.