Saturday, July 11, 2009

Credit Scores, Necessary and Evil

I hate the concept of the credit score. Dave Ramsey calls it, "an I love debt score." I tend to agree. What a credit score says is that we have debt and we manage it. Many insurance companies are now determining premium rates based primarily, if not entirely, on credit scores. Potentially, then, a person or couple, who have become debt free and are at a disadvantage in getting insurance with some companies. That is wrong on more levels than I can begin to explain.

Many employers, look at credit scores when considering potential new hires. If the credit score carries too heavy a weight, many wise and disciplined individuals will be passed over because their credit scores are declining.

Credit score requirements for mortgages have recently gotten much tighter. Now, it takes a score of 740 or higher to get the best rates. You can read about that HERE.

The really savvy money manager will read between the lines and see that the work around for this tragedy is a bigger down payment. It may take a little longer to save up a 30% or 40% down payment, but it will be worth it in terms of monthly payments and in the overall amount of interest paid because the mortgage will be lower.

Never finance fees. Never.

It drives me nuts to think that our economic system is so messed up that Credit Scores are the basis of so many important decisions. That's stinkin' thinkin' as Zig Ziglar would say.