My knowledge of the history of credit is rather limited, which is something I discover at a greater scope and in more dimensions daily. I have read a number of business and finance books and yet examining the personalized ramifications of it all never did appeal to me because I have always been consumed by wishing to not have any debt.
I financed my bachelor’s degree in the US and master’s degree in Canada, as well as advancement or continuing education certificates by saving from earnings and then paying by cash or check VISA card from my financial institution. When I overheard current colleagues in Kansas speaking about point reward systems with their American Express and Wells Fargo VISA cards, I began applying for these cards and was systematically declined for all cards that I applied for. Another friend and colleague advised me to visit creditkarma.com (a resource that has proved to be indispensable – and as luck would have it, free) and it was there that I learned that my score was 636. In the United States, the credit score system ranges from 300 to 850. An industry standard I have found indicates that under the score of 640, one will have great difficulty getting an unsecured card (one which does not have some kind of deposit for collateral). In my case, I have no demerits or negative remarks in the factors leading to my final score – it is a matter of not having utilities or loans in my name. In effect, I do not exist in the credit system.
I did believe that I would be able to get an unsecured (no collateral down) credit card through my bank. What they offered me after 15 years of having significant deposits in two accounts was to place $2,000 in a 2-year Certificate of Deposit (Term Deposit) at 0.3% interest, a form of security, and then I could graduate to an unsecured card. I felt very slighted by this proposal, so I instead went with a CapitalOne MasterCard, which allowed for me to place a $99 refundable deposit for a time until my credit score may build up. This card is noted for reporting to major credit agencies in the US, and after several months to a year of paying down each payment monthly, many users report their credit score surging up by 100 to 150 points.
I have always said that the only thing good credit does is enable you to go into more debt. However, gaming the system is crucial to survival in an era where virtual money will continue to play a larger role in our lives. It takes reading 19th century novels to fully understand how creditors operate – the severity of the situation has been downplayed in our modern language. Wealthy individuals and organizations flush with cash can get financing for free or even get the subsidy of governments and then as you work down to those with less clout and information at their disposal, the costs multiply. The best way of looking at these figures is like this. If you have an individual who makes $2,000 a month and is able to save $200 a month, but then they experience an increase in fees from a service or utility they use by $50, their rate of savings has plunged by 25%. An individual who makes $2,500 and who saves $700 on the other hand would have a savings rate dip of 7% under these circumstances, and may also have more resources to offset this other loss.
What I have learned from creditkarma.com is that a person with a small income should consider using credit on a very small, manageable scale in order to have a war chest at their disposal in an emergency. My scoring situation is still ongoing, but I have learned that be utilizing (using) between 1 and 30% of my available credit and paying off the balance, the score should increase more quickly. I have borrowed $2,000 from another bank I have worked with for a six month term and set up automatic payments so that the score can be boosted further.
It seems like a Kafkaesque situation that there are punitive structures in place for individuals that pay cash or do not have debt. Any loan or credit card application does not question your higher education background or have any way of measuring outright cash purchases, so it is my belief that the scoring system is not designed to truly reflect one’s ability to pay a debt, but rather 1) to see how strong of a consumer you are and show your attractiveness as a big spender, and 2) create a situation whereby one is rewarded for moving away from cash. We will continue to see a war on cash, portraying it as a vehicle for tax evasion, money laundering, and a danger to carry around for fear of being robbed – all of which is true, but bear in mind that it does not come with the same administrative costs and fees that credit cards do for the merchants.
My personal aim is to get the rewards bearing cards, returning 1 to 6% on my purchases, but only to use the cards with large players and chains, while sticking to cash with local and small businesses, giving them a much needed advantage in the neoliberal economic model.