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OpEdNews Op Eds    H4'ed 11/3/10

Credit Scores and the Madness of Crowds

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In Terry Gilliam's dystopic film "Brazil" when Sam is being strapped into the torture-chair, the guard whispers to him some words of caution:

"Guard: Don't fight it son. Confess quickly! If you hold out too long you could jeopardize your credit rating."

That may have seemed like absurd dialog back in 1985 when the film was released, but in today's world all Americans are expected to worry about their credit score just like that guard does.

Being bombarded with advertisement day and night, online, on the radio, and on the television for services that monitor our credit reports, no wonder why the culture is so irrational about this matter.

How did we get here? It has not always been like this.

To summarize Adam Curtis's (British Documentary film maker) blog post on genesis of the credit craze:

LBJ's great society's/war on poverty was no longer politically expedient to pursue, so instead policymakers decided to flood the country with easy credit to fill in the apparent gap between rich and poor. But in order for this new paradigm to succeed, the population's cautionary attitude toward credit needed to change.

The attitude shift came on slowly, building up through the 80's and 90's and then reaching an apex in the mid 2000's. Part of it occurred semi-naturally, as a result of the stagnation in real wages along with an increase in the cost of living. Families were able to save less money, and were compelled to take on debt to maintain a standard of living comparable to their parents.


You can view his entire post here- Let Them Eat Plastic

Money lenders were out in force, after destroying usury laws, they became able to charge any kind of interest rate to any person who didn't have advanced training in contract law. Flooding poor neighborhoods with payday loan shops and filling up mailboxes with credit card offers, the culture became saturated with credit fever. Even pets and children were offered credit cards. Students in college, many of which had to take out loans to attend because of the rising cost, took on credit card debt to pay for those other expenses in college. (And who can blame them for not wanting to live like Raskolnikov in "Crime and Punishment".)

With all of this acting in unison people were also convinced that debt wasn't a bad thing after all. Advertisement agencies succeeding in creating an atmosphere that credit was the equivalent of a Hallmark card: a famous television ad showed a father spending the day with his son at the ballpark, paying for everything with his MasterCard, the ad concluded by stating that the whole experience was "priceless".

It's not only your typical consumer who follows this irrational lemming march, business use credit scores to discriminate against people when they apply for a job causing the infamous credit catch-22, those who need a job are often in debt, but those who are in debt can't get a job. On an anecdotal level a hiring manager's decision makes sense, but when you look into the scholarly literature, it's not true at all. So once again irrationality wins.

Then there's bankruptcy, the final vanguard against the society becoming a feudal state, which was made more difficult in 2005 by the US Congress through a bill sponsored by the lenders themselves. Ironically, the number of bankruptcies did decline at first, but then exploded to an all time high during the peak of the 2008 economic collapse.

Just like the "Welfare Queen" name calling of those on public support, bankruptcy has been given an irrational negative stigma. This is most apparent when you listen to pseudo-financial experts like Dave Ramsey, who sends the message that your a deadbeat if the word bankruptcy even enters your mind if your sinking in a quagmire of debt. And sadly because of people like him, those who should be declaring bankruptcy aren't doing so because they feel that by doing so would be an immoral act; that a 341 meeting involves standing in front of a firing squad. They are told that they deserve to be the housekeeper in De Maupassant's "The Necklace" and they believe it.

All these ideas are manufactured of course. There's no natural law that says that your worth as a person is determined by the amount of credit you can get a hold of. Getting upset because a friend has a Visa Platinum card and you can only get the Gold card is the goal, banks love motivated customers, and keeps this predatory system lubricated.

Credit monitoring services are just paranoia engines that wake people up in the middle of the night with a loud siren if anyone tries to access their credit report. It's all nonsense in the end, if you become a victim of identity theft, you can dispute it and the problem will go away. And besides, none of it matters to a person who can save money in the first place.

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Tony Irwin is an online activist whose main interest is in public relations, internet openness, open source software and creative commons licensing. Being a lifelong learner is one of his passions in life. He is a graduate student in (more...)
 
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