Credit Card Economy: How Credit Ratings Punish The Financially Responsible

03/30/11

This is a rant - a rather personal one. I won't pretend this hub to be professional financial advice. If you're looking for methods to best utilize a credit card, this isn't the hub. If you're looking for yet another article speaking the evils of credit and consumerism, there are plenty, but not this hub. This hub is a rant on how I can't stand the fact Keynesian credit economics punishes people who save money. People like me.

First issue I must rant: Will the Canadian government get off its high horse and stop evaluating the financial responsibility of people based on their credit score? Here's a hint Flaherty! Why don't you evaluate people's financial responsibility based on their savings rate?! The naysayers who happen to have good credit argue that savers like me could "just spend all that money tomorrow, so it means nothing." Excuse me?! How do you think I got a high savings rate in the first place? I don't go on binge spending. People with good credit ratings on the other hand. . . What can I say? I'm at the mercy of the TransUnion auto-bot (that's our credit rating company here in Canada) every time I wish to purchase something with a payment plan. Never mind the fact I have enough money on hand to buy that product several times over, while the good credit folks have zero in their bank accounts.

It comes down to how credit ratings are calculated. Every time you need to do a credit check, your credit rating goes down. Every day you don't buy anything with your credit card; your credit rating goes down. Every day you save a dollar rather than in debt a dollar, your credit rating goes down. If your payroll income is low, you're allowed to loan less, therefore your defacto credit rating will be low. If you're self employed, and trust me it wouldn't matter if you're a multi-millionaire, your credit rating will be down in the toilet.

So who does get a good credit rating? People who take on as much debt as they can carry while always making the minimum payments on time (usually the interest rate plus a little bit on the principal). People who perpetuate themselves in debt and pay almost as much of the entire principal on just interest come out on top. The more payrolls you get, the more you can loan, therefore the better the rating. So not only do stupid and irresponsible people with money get a good credit rating, but rich, stupid, and irresponsible employees get the best credit rating of all. Your living standards are all determined by your capacity to service and manipulate debt.

Savers like me, on the other hand, we're real losers. We get a crap credit rating, a machine called TransUnion prevents us from buying anything, and we're losing money every second our savings sit in our bank accounts because of the pathetically low interest rates. Why on earth do people measure financial solvency on credit is beyond my comprehension, considering the evaluation system for credit rewards the irresponsible and punishes the responsible.

-Donovan D. Westhaver