Puffy shirt

Identity theft is, at best, an enormous hassle for the victim. At worst it can be devastating. Victims' "credit rating" can be destroyed, forcing them to pay the PPR (poor person's rate) for everything from credit cards to insurance.

For the life of me, though, I can't imagine a circumstance in which being the victim of identity theft would force one to don a pirate costume and sing for tourists in a bad theme restaurant. That's not how it works.

For those readers fortunate enough or wise enough not to be acquainted with American television, I'm referring to this Freecreditreport.com ad. The song is catchy, the premise is puzzling. (But at least not inhuman, like this similar ad, in which our singing pirate advocates checking your beloved's credit rating and, if it is low, breaking up with them. True love, apparently, must first consult the opinions of Transunion, Equifax and Experian.)

I suppose the idea is that our troubadour's low credit rating has forced him to take a second job in order to pay the premium prices of the PPR, and that the only second job available to him was the pirate gig. Or something like that.

While I applaud the revival of jingle-based advertising, FreeCreditReport.com's campaign is based on an absurd lie: the idea that you are responsible, in any way, for fraud committed against a third party by criminals pretending to be you.

Imagine that I put on a pair of glasses and some fake bushy eyebrows and I walked into Warren Buffet's bank. "Why hello there Mr. Teller at Warren Buffet's Bank," I would say. "As you can see from my glasses and bushy eyebrows, I am Mr. Warren Buffet. Please withdraw $20 million from Mr. Buffet's, which is to say my, account, and give it to me, Mr. Warren Buffet."

That, in its simplest form, is what "identity theft" means. The above scheme is unlikely to succeed, but a related scam -- a kind of protection racket based on that scheme -- has proved immensely successful in extorting money from consumers every day.

This secondary scam isn't run to defraud money from banks, it's run by banks to defraud money from their customers. The name of this racket is "Identity Theft Protection."

In this scam, Warren Buffet's bank tells Mr. B. that they are liable, at any moment, to hand over all of his money to the next person who walks into their lobby wearing glasses and fake bushy eyebrows. The bank, they explain, would be helpless to prevent such an occurence. However, for a small fee -- say $20 or $30 a month -- the bank would be willing to offer him Identity Theft Protection. In exchange for this fee, the bank explains, they won't give Warren Buffet's money to anyone who can't prove he really is Warren Buffet. Otherwise, it seems, they can't be expected to distrust or doublecheck anyone who makes such a claim. So the bank is trying to charge an additional $240 or $360 a year to do what it's supposed to be doing anyway.

The bottom line here is, as Kevin Drum put it, "You Own You": "When identity thieves open an account in your name it should be the bank's problem -- not yours." Kevin neatly summarizes the ID-theft protection racket:

For their part, the major credit-reporting bureaus -- Experian, Equifax and TransUnion -- don't seem to care much about the accuracy of their credit reports. In fact, they actually have a positive incentive to let ID theft flourish. Like mobsters offering "protection" to frightened store owners, credit-reporting agencies have recently begun taking advantage of the identity-theft boom to offer information age protection to frightened consumers. For $9.95 a month, Equifax offers "Credit Watch Gold," a service that alerts you whenever changes are made to your credit report. Experian and TransUnion offer similar services. In effect, customers are being asked to pay credit agencies to protect them from the negligence of those same agencies.

One way to cut down on identity theft would be to require commercial credit-reporting bureaus to offer services like this to all their consumers for free. After all, the credit-reporting agencies are the ones who are failing to ensure that their reports don't unfairly penalize victims of ID theft.

That whole article is worth reading for a sane corrective to the bizarre, upside-down view relentlessly promoted by the moneylenders and credit reporting agencies desperate to blame the victims and to put all of the responsibility for preventing identity theft on consumers. That view -- the official one, not Kevin's -- is simply insane. It makes no more sense than arguing that Ronald Reagan was responsible for the bank robberies in Point Break just because Patrick Swayze was wearing a Reagan mask when he committed them.

One more level down, the infectious jingles sung by FreeCreditReport.com's Beck impersonator are also based on another, even more insidious lie -- the notion that one's "credit score" is a worthwhile, accurate or reliable measure of trustworthiness. Failure to make timely payments is one possible reason for a lower "score," but so is the failure to have large amounts of disposable income. By confusing and falsely equating those two things -- being untrustworthy and being poor -- our current obsession with credit scoring feeds into the mythology that the poor are poor because they are less deserving, less moral, less worthy than the rest of us.

A credit score, in other words, is not just an inaccurate and misleading metric; it's also an evil one.

Comments

[Lila]

I'm glad I'm not the only one who finds that commercial bizarre.

(On a related but much more trivial note, none of the "tourists in t-shirts" are wearing t-shirts.)

[Chip]

Almost as bad is the freecreditreport.com ad with the guys in the car implying that if they had just checked their credit report, they would be able to buy a nice car instead of the hoopty they end up driving. Ignoring the subject of the ad, it has some of the things that make jingles evil. There is the terrible lip syncing, but even worse is the fact that the tune sticks in your head like gum sticks in your hair. "F-R-E-E that spells free, credit report dot com baby..." Ahhhhh!

[Stan Taylor]

Thanks a bunch, Chip. Before coming to the comments, I was rejoicing that I'd never seen the ad that Fred references and therefore didn't have the jingle stuck in my head. I have, however, heard the one you mention. Time to stick a knife in my eye socket.

[Chris Koeberle]

Another important component of a high credit score is the willingness to incur debt. Having a large open line of credit increases a credit score; the best way to acquire a large open line of credit is to keep a small line of credit maxed out. A credit card with a $1000 limit that sees no activity except $400 in charges every month which are immediately paid off will never increase its limit. A credit card that is always maxed out and always makes the minimum payment will (generally) get a credit limit increase every year or two, ultimately leading to a significantly higher credit score. Living entirely within a budget is an (often surprising) way to maintain a low credit score.

[Chesaguy]

Not to mention FreeCreditReport.com will automatically sign you up for "TripleAdvantage" without warning that you'll be charged $9.99 per month (and make it a HUGE hassle to cancel). "Free" credit report indeed.

[aunursa]

When identity thieves open an account in your name it should be the bank's problem -- not yours.

I agree. I also think that financial institutions should bear an increasing legal liability for questionable lending -- such as offering credit cards regardless of the cardholder's ability to repay the loan, or offer home mortgages with teaser rates to lock in customers and then foreclose when they can't pay. Financial institutions should be more responsible in their lending practices.

he notion that one's "credit score" is a worthwhile, accurate or reliable measure of trustworthiness

My understanding is that a credit score is considered a measure of one's ability to repay a loan. I wasn't aware that financial institutions considered it to be a specific measure of a customer's trustworthiness.

[aunursa]

When identity thieves open an account in your name it should be the bank's problem -- not yours.

I agree. I also think that financial institutions should bear an increasing legal liability for questionable lending -- such as offering credit cards regardless of the cardholder's ability to repay the loan, or offer home mortgages with teaser rates to lock in customers and then foreclose when they can't pay. Financial institutions should be more responsible in their lending practices.

he notion that one's "credit score" is a worthwhile, accurate or reliable measure of trustworthiness

My understanding is that a credit score is considered a measure of one's ability to repay a loan. I wasn't aware that financial institutions considered it to be a specific measure of a customer's trustworthiness.

[Shadow Wolf]

My understanding is that a credit score is considered a measure of one's ability to repay a loan. I wasn't aware that financial institutions considered it to be a specific measure of a customer's trustworthiness.

Officially, you're correct. However, in practice, credit scores get used for a lot of purposes they shouldn't. For instance, my landlord uses credit scores to determine how much of a deposit is required from a new tenant. Since I don't have a score (I have no debt of any kind), I had to pay a full month's rent, while someone with a ton of debt, and a good score, would have had to pay a quarter of that.

Part of the reason for this is that figuring out how trustworthy someone really is takes time, either in getting to know them or investigating their background. Banks, landlords, etc. can't really do that, so they end up using this magic number as a substitute.

[Dahne]

Anybody else ever get the sudden urge to punch everyone involved in these commercials, especially the car one? Anybody who uses the word "posse" with a straight face and isn't talking about cowboys should by all laws of language karma get a steeljawed piranha in the ass.

[M Groesbeck]

Framing the credit score as a moral measure is vital to the debt-based contemporary American capitalist model -- it makes a number assigned by three private organizations an objective measure of a person's financial worth, and under ideological capitalism financial worth = moral worth. Spreading this model encourages people to adjust their actions and desires to those that will most benefit the people who claim ownership of the resources they spend.

[djustin]

There's a radio ad in my area that, while not nearly as insidious as the freecreditreport.com commercials makes a similarly absurd claim. After the charisma-impaired spokesperson confidently announces his social security number on air he offers listeners a free two month trial of his company's services, on the assumption, I suppose, that if your identity has not been stolen during those sixty days clearly the service/magic spell/invisible forcefield works. Just like this rock I bought to keep away tigers.

[Ryan]

Sheesh, I hope at least some of those identity protection services do more than John Hargrave's.

I'm so thankful that Scott is no longer here to try to explain how banks deserve to get away with being this irresponsible and how Fred is just looking out for number one.

[Stacia]

The band in the car commercial are the same guys that are in the pirate restaurant commercial. I'm somewhat immune to the commercials because I always mute the TV, but still, they are annoying.

I won't include links because anyone can google "identity theft horror stories" and see them, but there are a lot of stories out there about people who have bad credit because of identity theft, and this bad credit means they don't get jobs, can't find decent apartments, etc. Are these stories all false?

In the last 2 jobs I had, I had to agree to a credit check and a background check. To be a typist. Credit ratings matter. They shouldn't matter but they do... that doesn't mean banks and credit cards are providing any kind of real service to someone for $10 a month. If your important papers or cards are stolen, then you'll know to cancel things and check your credit. If someone steals something from your trash and you don't know it, you're still okay - you can pull your own credit rating for free twice a year, which would probably be enough to catch identity theft.

[Adrian]

This (from the British Mac&PC ad guys) makes the point very well: http://www.youtube.com/watch?v=CS9ptA3Ya9E

[Praline]

I particularly hate a credit company that advertises during the daytime here - Bright House - that puts up a goldeny, bubbly ad about how wonderful it is that they'll give you credit for all kinds of things like big televisions and washing machines without checking your credit rating... for an interest rate of only 29.9%!

So, let me get this right - you're choosing an advertising slot that's likely to aim at the unemployed, who can't afford a washing machine and don't need a big television as they presumably have at least a small one if they're watching this ad, for only double the usual, already exorbitant, credit card interest?

I guess I missed the chirpy guy with the baseball bat somewhere in the picture who comes round to break your knees after you miss a payment.

They need to be stopped.

[Mabus]

Ignoring the subject of the ad, it has some of the things that make jingles evil. There is the terrible lip syncing, but even worse is the fact that the tune sticks in your head like gum sticks in your hair. "F-R-E-E that spells free, credit report dot com baby..." Ahhhhh!

"My posse's sticking to the vinyl and my legs are gettin' laughed at...." I may not be Weird Al, but I know how to deal with a jingle stuck in my head--make fun of it.

Last year, when I was already a hair from broke, someone managed to get ahold of my debit card number--I don't know how. The really insulting part was that once my account was overdrawn (from California, apparently), they kept making these 1-cent charges, each of which hit me with another $20 in overdraft fees. Fortunately I managed to get the whole thing canceled.

[sophia8]

Here in the UK, you don't (yet) have to have a good credit rating to get most jobs. One of my kids works in a Government department that handles peoples' confidential personal data; anyone wanting to work there has to undergo rigorous background checking, which of course includes financial checks and credit ratings. About once a year, they catch one of these squeaky-clean credit-worthy employees stealing and selling data.

[RickRS]

... I also think that financial institutions should bear an increasing legal liability for questionable lending -- such as offering credit cards regardless of the cardholder's ability to repay the loan, or offer home mortgages with teaser rates to lock in customers and then foreclose when they can't pay. Financial institutions should be more responsible in their lending practices.

Yeah, but the Republican congress have already pass the bankruptcy reforms laws (last year or the year before?) that did nothing stop questionable lending, but did make our government a collection agency for the credit card companies. Hold a bank or credit card company responsible? What, are you un-American or something?

[Bill]

Last week, I got a call from my credit card company telling me that someone had tried to charge over $1000 on the card. This is the third time in 5 years that that particular account had been compromised. (I know, I should have cancelled the second time, at the latest, but I guess I was stupid).

I complained to the guy on the phone that I was going to have to cancel the account because I couldn't trust them to keep my information safe. Their only response was to offer me a deal where for a "moderate fee" they would give my account extra protection. I told them that they were crazy if they thought I was going to pay them for something they should be doing for free. His response was that all their accounts are protected, but the ones that pay are even more protected. It sounded like a Mob shakedown to me, so I finally wised up and closed the account.

[Cyllan]

A credit card with a $1000 limit that sees no activity except $400 in charges every month which are immediately paid off will never increase its limit.

I have not found this to be the case personally. We pay off our credit cards every month, have never maxed them out, and the cards receive regular bumps in their credit limit every four or five months or so. This may be less common than maxed out cards getting increases, but it is certainly not a blanket statement.

[KnigthHawk]

"My understanding is that a credit score is considered a measure of one's ability to repay a loan. I wasn't aware that financial institutions considered it to be a specific measure of a customer's trustworthiness."

It's implicit man. I've worked for a credit card company for a couple of years now, and let me tell you, when someone with a 520 credit score calls us, it's usually assumed they don't pay their bills, and often that they can't handel adult responsibility. It's why we refer to whether or not you qualify for a credit increase, or just opening a card in the first place, as "credit worthiness". It's a nice why of saying whether your CBR says we can trust you or not.

As for Fred's post....yeah, pretty much. I've been saying the same thing for a long time. That's not helpful or adds anything, but, hell, it does make me feel GREAT before I go to work putting people into debt. *facepalm*

Love. Peace. Metallica.

[Tonio]

Failure to make timely payments is one possible reason for a lower "score," but so is the failure to have large amounts of disposable income.

I would never have known that. I had assumed that your credit score was based mostly on how far you had fallen behind in repaying your loans. Meaning that a wealthy person who regularly fell in arrears would have a much lower credit rating than a poor person who always paid on time.

[Naked Bunny with a Whip]

*scribbles furiously* Bushy eyebrows...Warren Buffet...twenty million...haha! I'm outta here! So long, suckers!

[Cathy W]

The freecreditreport.com commercial that makes me want to throw things at the television is the one where the guy is singing about how he should have checked his fiancée's credit score before he married her, because her bad credit is keeping them in her mother's basement. (And I really wanted that song stuck in my head before I've finished my coffee... thank you so much, really, from the bottom of my heart.)

...and Praline? 29.9% is nothing - in the U.S., a lot of credit cards jump to that if you're a day late on the payment. The equivalent commercials around here have teeny tiny print on the screen for a moment mentioning that the APR is 99.5%, and there's perfectly legal businesses doing short-term loans for an APR that works out to 300% over the course of a year.

[Amaryllis]

CathyW: when I first saw that ad, all I wanted to yell at the ungrateful, lazy, freeloading jerk, was "get a job, ya bum!"

Paying for goods already consumed or pleasures past used to be called "paying for a dead horse." What with usurious interest rates, late fees, unilateral rules changes, and all the rest of it, it's very easy to find yourself paying for that poor dead nag for a very long time.

And for that matter, why can a credit-card company change its agreement with me, when I don't have a reciprocal privilege?

[aunursa]

RickRS: Yeah, but the Republican congress have already pass the bankruptcy reforms laws (last year or the year before?) that did nothing stop questionable lending, but did make our government a collection agency for the credit card companies.

Yes, I know that. The solution is for the current Democratic Congress to pass another set of laws to hold the financial institutions responsible for their dubious lending practices.

[Rosina]

Last week, I got a call from my credit card company telling me that someone had tried to charge over $1000 on the card. This is the third time in 5 years that that particular account had been compromised. (I know, I should have cancelled the second time, at the latest, but I guess I was stupid).

That was really rather helpful of the credit card company - asking before allowing the payment. I ordered a piece of electrical equipment from Amazon, and my card company rang before authorising it, since I normally only spent £20-30 with Amazon. I confirmed it was me buying a DVD recorder, and was rather reassured that they were paying attention.

I complained to the guy on the phone that I was going to have to cancel the account because I couldn't trust them to keep my information safe.

Why assume that it's the credit card company not keeping your details safe? Whenever you use your card you give the details to the retailer, whether in person or on-line. Like being told not to give your bank account details to any one - they're printed on the cheques you give to people!

[Myriad]

I would never have known that. I had assumed that your credit score was based mostly on how far you had fallen behind in repaying your loans. Meaning that a wealthy person who regularly fell in arrears would have a much lower credit rating than a poor person who always paid on time.

it's amazing what will affect your credit score. really. things like, transferring balances from one credit card to another to get a lower rate. you know, like what credit card companies are constantly trying to get people to do. "take advantage of this special offer, and get 0% on balance transfers for 12 months!" that will lower your credit score.

not having a certain ratio of available credit will lower your score. if you have three credit cards and they are maxed out or close to maxed out, you can do one of two things. 1) pay some of that off, to give yourself more available credit, or 2) get another credit card!

but even more fun is, you can lower your credit score by closing credit card accounts! yes, that can lower your credit score. finally paid off a credit card with a monstrously high interest rate? don't close it, just cut it up.

there are more, but those are my favorites.

[Tonio]

Myriad, thanks for the information. Thanks to my wife's diligence, we pay off our two credit cards each month, never carrying a balance. Also, we sometimes take advantage of "one year same as cash" offers by paying off the loan amount before the one-year mark. This requires financial discipline, and I'm grateful to my wife for teaching that to me.

[Myriad]

@ Tonio:

ooh! ooh! that's another way to have a lower credit score.

from Six Ways to Kill Your Credit Score
When it comes to your credit record, fat is good, emaciated bad.

Even if you're the most responsible, on-time, in-full bill payer on the planet, your credit score won't be as high as it could be if you have just one credit account.

The reason: Your credit profile is too thin and lenders ideally like to see a potential borrower responsibly managing a mix of revolving debt (such as credit cards, where you can reuse the credit after paying it back) and installment debt (such as a car loan or most mortgages, where you pay the same amount every month for a certain period).

To boost your score: Consider opening another credit-card account or two, or taking out a car loan or small bank loan.

[is your mind boggling yet?]

[Tonio]

Of the junk mail that we receive, probably 75 to 80 percent of it is offers for credit cards.

[Cyllan]

Tonio, it's really easy to cut out those offers. Somewhere (in microprint) on each of those offers is a number that you can call to block random sweeps of your credit report by credit card companies. Make the call, sign up for the lifetime block, and presto! Credit card offers will drop off enormously.

[Myriad]

@ Tonio: well, I don't mean to imply that you (or anyone else, for that matter) has bad credit, or has bad credit practices. I just find it amazing how many counter-intuitive ways people can develop a bad credit score. be fiscally responsible/conservative/reductionist/whatever and have a bad credit score! whee! you know, that sort of thing.

[Cathy W]

Myriad, that's exactly why I'm not closing the account I'm paying off with my "economic stimulus" check. I don't want to keep the card - I don't like the corporate practices of the issuer (see Amaryllis above re. unilateral changes to terms), and I have no intention of ever using it again. But I'm going to need to replace my car in the next year or so (it's old enough to vote and starting to show it). I can't afford to take the hit to my credit score because there's no way I'll be able to pay cash for anything worth driving.

I will still do a gleeful dance of joy once I'm officially no longer in hock to that particular credit card issuer, though.

And Amaryllis - they get to make unilateral changes to the terms because you agreed to let them do it as a condition of issuing the card. It's in that agreement you signed somewhere. Sucks, don't it?

[Tonio]

I don't mean to imply that you (or anyone else, for that matter) has bad credit, or has bad credit practices.

No offense taken. I was simply questioning the rationale behind credit ratings. No matter how responsibly you manage your debt, it's not financially healthy to carry too much debt in the first place. Obviously this depends on your income and the types of debt that you carry, revolving versus installment. But also obviously, lenders disagree about that concept of financial health because it affects their bottom line. If restaurants adopted a version of the credit rating, patrons who recently had gastric bypass surgeries would pay more for their meals, based on the assumption that they would eat less.

[Myriad]

LOL that's a really interesting comparison!

I agree that it's not good to be in too much debt, or even any debt at all. oh, to have no debt! I would be living comfortably if not for my debt, which is primarily student loans, and enough to be annoying and downright inconvenient. but that fact apart, even though I think many (if not most) people would agree that having no debt at all would be ideal... if you don't have debt, you don't have a credit report!

and if you don't have a credit report (these days), you can't get loans! and unfortunately, even in an ideal world where I have no debt, I doubt I could manage to save up enough money to pay cash for a house. more's the pity.

and I agree with Fred. credit reporting as currently conceived is a total racket, and not intended to benefit consumers.

[Keith]

And here I was thinking I was doing the responsible thing by paying off my credit cards and getting out of debt. apparently, I've been an Unamerican terrorist, helping to undermine our God-given economic supremacy by not being in it up to my eyeballs.

well, at least I still have my ridiculously outrageous student loans. Those will never go away.

[inge]

Myriad: Consider opening another credit-card account or two, or taking out a car loan or small bank loan.

So, the interest you pay for that loan minus the interest you gain on the borrowed money while you do not need it is the price tag of better credit rating...

[Naked Bunny with a Whip]

I had a roommate get turned down for a savings account because of his lousy credit score. Not a checking account, a savings account. I can't figure out how credit is even relevant.

[Jeff]

It makes no more sense than arguing that Ronald Reagan was responsible for the bank robberies in Point Break just because Patrick Swayze was wearing a Reagan mask when he committed them.

It could be that "trickle-down" forced patrick Swayze into a life of crime (I haven't seen the movie), so it could be that Reagan was responsible! A better analogy might be that William Shatner wasn't responsible for the murders committed by Michael Myers (except that watching too much Trek might have driven him IN. Sane!!!!).

[Amaryllis]

Cathy W: And Amaryllis - they get to make unilateral changes to the terms because you agreed to let them do it as a condition of issuing the card. It's in that agreement you signed somewhere. Sucks, don't it?

Yep.
"They have digged a pit to take me, and have laid snares for my feet." And I walked right in.

And while I don't particularly want to "pour out their blood by force of the sword," maybe just a little overthrowing?

Because it's so much easier to walk into that hole than to climb back out of it.

[Raka]

These protection rackets are often marketed with "Sign up, get the first month free and a $X deposit to your account!". My wife delights in accepting these offers and promptly canceling, an option that is stressed in the promotional materials (the companies counting on forgetfulness and apathy preventing a profitable percentage of clients from actually following through). The people on the phone always ask why she's cancelling the service, and she always tells them.

She was chided by a representative of one company (after he finished his fact-challenged horror-story/sales pitch), who asked how she could sleep at night while maliciously abusing the system. She just laughed. Said company has continued sending us the offers every month or two, and we continue to happily accept the money they're so eager to give us. America: truly, the land of opportunity.

[Apsalar]

We pay off our credit card in full every month too, and they bump up the limit fairly regularly. I guess they think that if we can charge an entire Hummer on it, or something, maybe we will, and not pay the whole thing off afterwards. So far we have resisted the Hummer-buying temptation.

[Raka]

There are a lot of people boggling over what raises and lowers your credit score. As with most things financial, there's not a lot of point applying moral (or even common-sensical) perspective to the process. It's all cold, hard statistics. They aren't looking for trustworthiness, or responsibility, or reliability. They're looking at a number of factors, comparing them to a massive historical database, and saying that people with similar factors resulted in a certain amount of profit. That's all. Sometimes it makes sense (like a history of bankruptcy lowering your score), and sometimes the reasoning is a bit more abstruse (like a certain number of certain types of loans with a certain current/available balance ratio being good, and any other mix being less good). The banks don't give a rip about what virtues or vices contribute to these factors. They just plug in your numbers and see where you fall.

It's also worth noting that your credit rating is not solely a measure of risk (though that is the primary factor), but also profitability. If you pay off your debts quickly, you are trustworthy and will almost certainly get some sort of loan, but they won't compete to get your business the same way they will for someone who is both reliable and likely to pay the full predicted amount of interest. There's nothing wrong with that, but it leads to problems when people assume that credit rating is measuring things that it really isn't.

[Jenny Islander]

We pay nearly all of our bills on my husband's mileage-plan credit card and pay it off in full all but one or two months of the year (even though they keep "adjusting" the billing cycle, we suspect in an attempt to force him into a late payment and subsequent fees). The company keeps sending him nicer cards and we are able to travel a bit.

OTOH, when we bought our house, I was aghast to find out that I had no credit rating at all. I had been faithfully paying down my student loan, making extra payments whenever possible, and also keeping up with my phone and utility bills. But I had no credit cards or cars and I lived in an apartment. And that humongous student loan didn't count. I was furious.

[Naked Bunny with a Whip]

I normally pay for my hummers with cash.

Er, wait...

[Pope Easier Rhino I]

I recall, some time back in the dark ages when credit report companies were still only using junk mail rather than advertising on TV, that a humor columnist, probably Dave Barry, wrote a column about receiving one of these offers which said he could pay them (right up front, too; what an age of honesty) a certain amount of money to check his credit. His response was something along the lines of saying, in the column, that in exchange for this company keeping an eye on his credit for free and making sure nothing went wrong, he in turn would keep an eye on his column to make sure it wasn't spreading any rumors about the company. Organ harvesting came up at some point, which I felt was a fairly apt comparison. Would that people had spines and could band together to enforce our will in this way. Some sort of voting process would probably be in order.

[Catrijn]

Jenny - it all depends on whether your lender reports to the credit bureaus or not. It's optional, not mandatory, so some do and some don't. My student loans (thankfully quite small) show up on my credit report. Same with utilities - and actually, even worse, since I get the distinct impression that they generally don't report at all unless/until you fall behind. Doesn't help you now, but this is one of the reasons why it's really important for married women to make sure they have at least one credit card with a good limit in their name. (Ironically, in my marriage it's reversed - need to make sure my husband has at least some credit in his own name. I handle the finances and had much better credit when we got married, so almost all of ours are in my name.)

[Myriad]

@ Tonio: I was simply questioning the rationale behind credit ratings.

as it was explained to me, somewhere, in some hazy past time that I can't recollect, the whole credit score system was developed roughly 18 years ago in response to deregulation of banking. basically, as banks became larger and larger, and more competitive, it became less likely that your average loan officer would know the potential customer walking in the door asking for a loan. or even that said potential customer would have an account already with the bank on which to base some judgement. couple that with the rise of the internet, and financial institutions, instead of using personal judgement and other considerations to give a loan, had to come up with a easier way of evaluating credit risk. voila! numbers!

[and if I am remembering incorrectly, or am just pure D wrong, please someone who is knowledgeable, explain for everyone's edification, because I find the whole thing quite amazingly strange.]

now, I don't think the concept is all bad. potentially, it could be a very useful way of evaluating potential customers/risk without or with less bias. just because someone has lower income or a certain color skin or whatever doesn't mean that person is less likely to make payments on a timely basis. however, I don't think things have shaken down in quite that manner.

and, as noted, there is a lot of confusion and misconception about credit scoring, what it means, and how it works. I only know about this because there was an article about it hung up on the wall of my credit union account rep while I was opening up a new account recently. I didn't have a chance to read the whole thing, but what I read surprised me.

@ inge: So, the interest you pay for that loan minus the interest you gain on the borrowed money while you do not need it is the price tag of better credit rating...

I'm having trouble visualizing that, but it sounds about right. =)

[jamoche]

finally paid off a credit card with a monstrously high interest rate? don't close it, just cut it up

But is there any way to stop getting blank "checks" in the mail for the credit card? I've one card I haven't used since they claimed a payment bounced and charged me a bounce fee *and* a late fee (funny, my bank had no record of a bounced check - not surprising since at no point had my bank balance dropped below 10x the amount of the payment). Of course nowhere on the mail they keep sending me is a "how to cancel this card" so I just haven't got round to it. But those checks worry me, because what's to stop someone stealing them from the mail and using them?