A popular financial question to ask yourself is, “What is my credit score?” But what if you didn’t actually have a credit score? The funny thing about credit is that, by the current credit scoring model, consumers actually need to have debt to have credit. But there are people out there who don’t have debt, never incurred student loans, don’t pay with a credit card. They may be paying rent, utilities, and have other sorts of financial responsibilities that they are fulfilling, yet because they don’t have debt, they do not have enough credit history to generate a credit score. If you’re sitting there saying, oh, there can’t be THAT many people in that boat–guess again. Experian estimates that 66 million Americans are unscoreable. How does this affect me, you ask? Believe it or not, it does. These people are unable to get jobs, loans, start businesses. And if you think that many people being unable to do all those sorts of things does not affect our economy, you’re wrong. This is what a Forbes article written by Jose Quinonez has to say about the situation:
“Millions of Americans are locked out of low-cost credit markets simply because they don’t have credit scores. That’s millions of consumers who can’t qualify for a loan even when they have the ability to repay it. Experian, a major credit reporting agencies, estimates that 66 million Americans are unscoreable—they do not have enough credit history to generate a credit score. And without a credit score, they can’t get loans to buy cars, start businesses, get mortgages, rent apartments, or even get jobs.
Current credit scoring models severely restrict the financial potential of millions of people, hampering the overall growth potential of our economy.”
Click here to read about why the current credit scoring model doesn’t work, and the effect that it’s having on the entire U.S. economy.
I know that sometimes things like rent and utilities are included on credit reports–but not always. I do think it is a good idea to tweak the credit scoring model to include these things. I can’t see it hurting anything, unless of course consumers have a general problem with paying their rent on time. We might see some scores drop, but we’d see a lot more scores pop up–those of the people that deserve to have a credit score, but in the past haven’t been scoreable. Can I get an Amen??