It is hard to feel the pain and the shame people experience when banks refuse to grant them a loan or issue a credit card because of embarrassing credit scores. The agony is not just limited to banks. Auto-insurers, private money lenders, and mortgage companies have all started using credit scores to determine a person’s creditworthiness. What’s even worse is that employers, too, have begun tapping into the credit scores of job applicants for hiring purposes.
Before delving deep into the subject, we would like to ask you something. Can you imagine what a vicious circle it is? You need money to pay your outstanding dues and improve your credit score. To earn money, you need to work. But you can’t get a job until your credit score improves. Just imagine the plight, folks. It is precisely to provide freedom from such shackles that credit repair companies came into existence.
This article highlights the various flaws associated with credit scores. These shortcomings raise serious doubts about their credibility and question the logic behind their applicability.
Credit Scores in the US
In the US, an individual or business’s credit history is strictly monitored by the three credit bureaus, Experian, TransUnion, and Equifax. Each of these credit bureaus issues credit reports highlighting your payment history and outstanding debt. If you fail to repay credit card debts on time, default on bank loans, have housing foreclosures, or file for bankruptcies, your credit score will take a supersonic jet down south.
The Credibility of Credit Scores
The debate around the rigid structure around credit scores and their applicability is an ongoing one. Let us explain what we are trying to say with the help of a few examples. You receive an online cheque as payment for services rendered. You deposit the same into your bank; not knowing the issuer of the cheque is fraud. The cheque bounces and your bank reports you to the credit bureaus.
Let’s take another example. Your best friend receives a payment and requests you to deposit the cheque in your bank because he does not have a bank account. You deposit the cheque in your account in good faith, but, unfortunately, it bounces. Your bank immediately reports you to the credit bureaus.
Do you guys still need another example? So be it, one final example, just for you folks. Your wallet gets stolen. It contained some cash, your social security card, and your bank debit and credit cards. Before you could report the incident and action is taken, you find the person who stole it has made exorbitant purchases on your credit card. The cards are ultimately cancelled, but the damage has been done. You now have two choices. You can repay the money, file a dispute, and wait for a resolution. On the other hand, you can file a dispute, not pay anything, and let the banks report you to the credit bureaus until the dispute is resolved.
In all the examples listed above, were you trying to commit fraud? No. Instead, you became a victim because of somebody else’s greed and because you trusted people and tried to help others. Unfortunately, the credit bureaus do not take into consideration such circumstances. Yes, there are options available to dispute credit scores; however, your reputation has already gone for a toss by the time disputes are resolved, favorably or unfavorably.
The Applicability of Credit Scores
We looked at how the credit scores for an individual or business may not reflect their true nature. Let us now look at the applicability aspect. In our opinion, auto-insurers and employers should not judge customers and job applicants based on credit scores. Firstly, as discussed above, they might be a victim of fraud or identity theft. Secondly, can somebody please explain how credit scores help judge how people drive or perform at work?
Final Thoughts
Many people would agree with our point of view. There would also be some who might not. That’s perfectly alright. People have a right to their opinions. However, irrespective of where you stand, you would agree with us on one thought. Given the rise in the number of people reported to the three credit bureaus, the importance of credit repair companies has now grown more than ever before.
Resources:
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