Credit Scores- Why do they Exist?

A headline read 'Credit Scores Hit Record Highs' but a single company develops the formula used to calculate every American's credit score. Thus, while general trends mentioned in the article such as people's past bad credit decisions falling off their reports are contributing to improving credit scores, another factor that could cause peoples' scores to go up is if the formula itself changed. And in fact, that is what happened.

You see, because the financial industry is profit-based and so when the banks have more money, they have more money to give to the credit rating agencies. Thus, it is in the rating agencies' interest for the perception of increased credit ratings to be created in the market so more loans are given and banks make more money. If they believe that by ignoring certain factors previously thought important by the agency in rating credit, they can increase loans without incurring significant risk, that's the move they are going to make. The point is, when we see a headline that talks about increasing credit scores, we have to make sure we get the whole picture.


Beyond the inherent problems with the ways these scores are calculated, demonstrated in our little example, the power credit scores can have over people's lives is problematic. To understand that problem, however, we must understand how problematic it is that the average person is not guaranteed an income in this economy while simultaneously being subject to unreliable credit access. Now you are transferring power over this individual's life from themselves to a profit-driven organization that actually views their financial status as a product rather than a key to a tolerable life.

Problem
Credit agencies issue arbitrary credit scores that can have profoundly negative effects on our lives.

Solution
With a living income guaranteed, we can insure that we always have access to the resources we need to survive. Thus, credit extended for various projects is much more likely to be used for the actual project at hand and thereby carry a low risk of default.


Reward
By securing an adequate income for everybody, we will not only gain the positive benefits of a massive injection of income virtually guaranteed to be spent, but entrepreneurial endeavors will be more successful overall. This will lower the risk of defaults and generally make credit more available. An economy where nobody is below poverty and lots of people have access to credit is the healthiest kind of economy.





Investigate:
Living Income Guaranteed
Equal Money System
EQAFE