Originally, the “Five C’s of Credit” ruled: Character, Capacity, Capital, Collateral, and Conditions. These determined whether a conservative banker would have faith in your ability to repay a loan. Over time, many financial institutions became lazy or irresponsible and started to ignore these fundamentals.

Instead of looking at the essential pillars of financial strength, these lending institutions started to worship one single number – the Credit Score – as the best measurement of how successful you would be in life. Nowadays, the credit score is used to determine not only whether you qualify for credit, but also whether you qualify for employment, housing, and even a cell phone plan. Many companies believe that a credit score measures and identifies whether you have “good character.”

Identification Cards, Numbers, and Scores … Oh My!

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More people are claiming to be victims of identity theft. But that is not completely accurate; when you do your research you realize that these people have not been kidnapped or cloned. Instead, they have had their “identification numbers” stolen. The problem is not that John Doe has changed. The problem is that modern society has become so addicted to “identification cards, numbers, and scores” that it does not recognize the “Real John Doe” versus the “Fake John Doe’s Stolen ID.”

Modern society is trying to categorize people according to identification numbers. Remember when the Social Security Numbers were first issued? The government said they couldn’t be used for normal matters. But guess what? Everyone – businesses, employers, and strangers – started requesting your Social Security Number for identification. The same thing is occuring with credit scores.

Financing

Your credit score determines whether you will be successful in receiving financing for consumer purchases, automobiles, or mortgages. Credit card interest rates are determined by the credit score. A good credit score enables you to have more leverage in negotiating with lending institutions. You will save money when you have a better, higher credit score.

Employment

Potential employers want to know whether you have good character traits. Your credit score reveals whether you have paid your debts on time, have ample savings, or filed for bankruptcy. Any of these negative circumstances could impact your work.

Housing

Apartment complexes are interested in whether or not you paid your rent on time. A lower credit score could lead to a higher rent or security deposit.

Car Insurance

Credit scores are a risk management tool that is used by insurance companies to determine how likely it will be that you have an accident. Along with a criminal background check, the credit score measures your responsibility. It will be used to determine the rate to charge you.

Cell Phones

Most people don’t know that even cell phone providers are considering credit scores. When these companies set up your cell phone plan, they want to measure how responsible you are in making timely payments.

If you don’t keep up your credit you may end up needing this free cell phone from the government.

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