Chasing The Elusive Dream Of Creditworthiness
The credit reporting system currently is supposed to be fair. The Fair Credit Reporting Act of 1970 went into effect in order to prevent subjective decisions by lenders about which borrowers to approve for loans and how much to charge them to borrow money. Before the days of the Fair Credit Reporting Act, creditors could choose to lend money, or to withhold loans, based on racism, nepotism, neighborhood gossip, their own whims, or any other incomprehensible criteria. Today, the credit reporting agencies use a standardized metric, based on which they assign a numerical credit score. This is certainly preferable to having lenders decide whether to approve your loan application based on judgments like, “He seems like a good guy” or, “He left my best customer’s daughter at the altar,” but the credit score criteria relate to your history of borrowing and repayment. Therefore, it is difficult to get a credit card or loan if you have not had one before, and in general, people with high scores tend to have parents with high credit scores. To find out more about establishing a credit score or improving your credit score after a financial setback, contact a Plantation credit repair lawyer.
Can You Be Financially Secure Without a Credit Score?
On a recent episode of the Quartz podcast, Nalis Merrelli and Scott Nover compare the U.S. credit score system to a game. For an ideal credit score, you should borrow just enough money, even if you can afford to purchase the item without borrowing. If you are wealthy, the game can be fun, but if you are not, it is downright demoralizing. What if your goal is not to win at the game of creditworthiness, but simply to live debt-free?
A debt-free, credit-free life is possible, but it is not the default option. In theory, it is possible to pay for everything in cash, never borrowing from a commercial lender because you do not need to. This is only possible if you have a high-income job, generational wealth, or both. The more common scenario, though, is that you do not have a credit score because neither you nor your parents have ever had a credit card or owned your home. You pay bills, including rent and utilities, but these do not count toward credit scores, so lenders do not find out how responsible you are with money. Therefore, you buy things on installment plans using buy now pay later (BNPL), which also does not contribute toward a credit score.
If You Have Debt, You Probably Have a Credit Score
The worst news is that paying your utilities and your BNPL bills on time does not count toward your credit score, but missing a payment does. Therefore, suffering a financial setback early in life, before you have established creditworthiness, can make it challenging to build your credit score. A credit repair lawyer can help you solve this problem.
Work With a Debt Lawyer About Establishing a Credit History
A South Florida debt lawyer can help you build your credit history or live well without it. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.