America’s credit system is broken

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America’s credit system is broken
I've carefully avoided debt my entire working life. So why am I having so much trouble getting a credit card?

By Bryce Covert, Next New Deal


My (early) New Year’s resolution was to get a credit card. You may remember that I have never had a credit card. And thus if I were on the dating market, my OKCupid inquiries would be flatly rejected. It’s not that I have a bad score. I just don’t have one. I had a good score when I was dutifully paying off my student loan after I graduated, but then through paying dirt-cheap rent in Harlem and never paying for cable I was able to pay off the loan. Since then I haven’t owned any credit products. I’ve paid my rent on time every month and paid every bill before the due date. But those things don’t make their way over to FICO. I’ve thus landed myself in quite the Catch-22 that speaks volumes about the lending industry and our reliance on it.

When I moved into a new apartment three years ago, I still had a score, so when the broker ran a credit check on me, she handed me the keys without a complaint. In the intervening years, however, the student loan must have fallen off my history, leaving a gaping void in its place. This is so unusual that when I was applying for a new apartment this summer, the broker told me there must be something wrong with my account. It turned out nothing was wrong – I just literally don’t have a score.

Because I was dealing with humans in both the broker and the landlord, I was able to explain to them that I don’t have a score because I don’t like being in debt. At all. On top of that, I can show steady income because I have the good fortune of being employed at a well-paying job. They agreed that made sense and gave me the keys. But the ordeal made me realize that if I were to deal with an institution instead of a human – a bank from which I want a mortgage, say, or even a real estate management company instead of a landlord – I would probably be screwed. So I decided to suck it up, sell out, and finally get my first credit card.

It turns out I was screwed earlier than I thought. Back when I had a fantastic credit score, I would get credit card offers in the mail by the dozens. So I decided to do the responsible thing and do some research on a good rewards card (might as well get something out of my sell-outery) that doesn’t have an annual fee and has a decent APR. Having found one, I filled out the online application and waited to hear that my soul had been sold. Not so fast: I was rejected on the spot. It turns out that not having a credit score is just as bad as having a damaged one in the short-term. The bank has no reason to trust that I can handle credit, so it won’t give me any. Which means I will continue to be denied credit and continue to have zero credit history. ....................(more)

The complete piece is at: http://www.salon.com/2013/01/03/americas_credit_system_is_broken/