For a number of years credit scores have been an increasingly-common lender shortcut, a way to quickly approve loan applications based on probability and mathematical models. And while lenders are happy to have their workload reduced through the use of quickie calculations, many are loathe to tell consumers how the scores are computed.
The arguments given for credit score secrecy work like this: Consumers won't understand score criteria; and if consumers do understand scoring criteria they may change their credit behavior and thus impact their scores.
To which one should add: So what?
In the lending game, credit standards are a way to measure financial behavior -- not how much you earn, but what you do with your dollars. If you pay your bills in a full and timely manner, lenders are elated and you get a higher score. A loan to you represents less risk, so you pay less interest.
But it turns out that some factors impact scoring in ways which are difficult to justify. For instance, it used to be that if you looked into a lot of loans your score would be reduced. When this measure became public, it was revised so that you could make any number of loan inquiries within a 14-day period and not be penalized.
But why shouldn't consumers shop for loans whenever they want, as often as they want? Do you pay more for a car if you visit a lot of dealerships? Do you pay more for a TV if you check a number of stores? Why then should you pay more for a mortgage because you ask lots of lenders lots of questions? That sure sounds like the work of a responsible consumer.
Suppose that -- shock of shocks -- you actually knew how credit scores are determined and adjust your behavior to obtain a higher mark.
Would not changing your financial style to something objectively better mean that you're now a lesser credit risk? Shouldn't that be what lenders want? Why is this a problem?
The time has come to re-think the entire credit reporting process, and so here are a few modest suggestions.
First, given that identity theft is a growing issue you should have the right -- anytime, as often you like, and whether or not you have been refused credit -- to access your credit data without cost. This is hardly a burden to credit reporting agencies since most people, most of the time, won't bother to check their credit standing.
Second, your credit scores are your business. Whatever magic number appears on your credit report should be made known to you at your request. Moreover, how the number is determined is also your business, otherwise you're in the position of attempting to play a game where the rules are available to the other team but not to you.
Third, every three months you should receive a list of the organizations which have viewed your credit report. Maybe you'd like to do business with some, maybe not, but at least you'd see who is in the market for your business and who has seen your confidential information.
I am keenly aware that the suggestions made here would result in a radically different approach to credit. But then, that's precisely what we need.
Online Credit Resources
Follow-Up
Last week I wrote about the right -- and need -- to protect broker data, and mentioned the use of "intelligent indicia" to identify the ownership of photographs and art.
In answer to those who asked about such indicia and how they can be used, please visit the Digimarc site. The Digimarc indicia is essentially an imbedded watermark that can be tracked online.
Also, ContentGuard, formerly an operating unit of Xerox, has now become an independent company. Microsoft and Xerox will collaborate with ContentGuard regarding digital rights management (DRM) technologies. The three companies say that with such technology they will improve the distribution of premium digital content, including eBooks, documents, music and video, over the Internet, while protecting against unauthorized usage or redistribution. Microsoft has also joined Xerox as a shareholder in ContentGuard, Inc.
Save Money Financing & Refinancing
The latest edition of The Common-Sense Mortgage -- now among the top-ten best selling real estate books nationwide -- is available in bookstores online and off. In print for nearly 15 years and widely recognized as the standard consumer guide to real estate financing, it's described by syndicated columnist Robert Bruss as "an encyclopedic, detailed summary of just about everything real-estate investors, agents, lenders and borrowers want and need to know about mortgages."
"On my scale of one to 10," says Bruss, "this superb book rates a 10."
"This continues to be the most, lucid, comprehensive treatment of the subject on the market," says The Real Estate Professional. "If you want solid, reliable information about residential real estate financing, written in a thoughtful, convincing style, this is your source."
For additional information, press here.
Question Of The Week
Q Can my brother sell a property that we jointly own without my approval even if I'm going to get most of the money from the sale?
A Property ownership in your name alone means you have a right to sell -- and a right not to sell, no matter how inconvenient that may seem to others.
With partial ownership interests the rules can be different, however. Have you signed papers authorizing your brother to sell the property at his discretion? Is the property owned in the name of a partnership, corporation, or joint venture controlled by your brother? Is your ownership interest noted in public records? Etc.
Before listing a property for sale, a savvy real estate broker will check the ownership records. If there's something other than fee-simple ownership, say ownership by a corporation or partnership, it's likely that written authority showing a right to sell will be required -- otherwise the broker could be in the position of offering a property for sale which cannot be sold.
Please see an attorney for details.
Weekly Resource
Looking for a good list of privacy sites and tools? You can't do better than the resource list maintained by EPIC -- the Electronic Privacy Information Center.
Credit Reports: Whose Business Is It?
