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Credit Scores are Absolutely Ridiculous · Ridiculous History

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  Speaker 1: Ridiculous History is a production of iHeartRadio. Welcome back to
• 0:27
  Speaker 1: the show Ridiculous Historians. Thank you, as always so much
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  Speaker 1: for tuning in. Please pardon my slightly batman voice, little
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  Speaker 1: little bit of weather on top of me, but we
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  Speaker 1: wanted to bring this episode to you. Guys were very
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  Speaker 1: excited about this and also, if being honest, thoroughly confused
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  Speaker 1: like most of America. We were talking off air when
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  Speaker 1: we did a history of credit cards, I believe it was,
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  Speaker 1: and our super producer, mister Max Williams sound cute, and you,
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  Speaker 1: mister Nole Brown, and I've been bowling.
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  Speaker 2: We started.
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  Speaker 1: We started saying, Hey, you know what's more confusing than
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  Speaker 1: the idea of credit credit cards. It's the idea of
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  Speaker 1: credit scores. Yeah, it does kind of have a language
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  Speaker 1: all its own. The idea of like.
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  Speaker 3: Hard versus soft credit inquiries, and like the two different
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  Speaker 3: reporting agencies equifacts versus TransUnion and experience experience exactly, and
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  Speaker 3: the idea that like, if you check your credit score,
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  Speaker 3: it gives your credit score a negative impact unless you
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  Speaker 3: use credit karma, which I guess is a soft inquiry.
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  Speaker 2: Yes, we're gonna find out about it. It depends on how
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  Speaker 2: you check the score.
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  Speaker 1: It comes up every time you need a big purchase,
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  Speaker 1: a house, a car, credit card, a line of a loan,
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  Speaker 1: right taking out a loan. If you've ever interacted with
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  Speaker 1: the financial system in the United States, folks, you would
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  Speaker 1: run into credit scores and arcane and omiration of numbers
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  Speaker 1: that are at times purposely obtuse, but still wield tremendous
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  Speaker 1: influence on the day to day lives of average Americans.
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  Speaker 1: Like do you not have enough credit? That's a ding
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  Speaker 1: on your score? Do you have too much debt that's
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  Speaker 1: a ding on your score? Did you get a new
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  Speaker 1: credit card that has a hard inquiry like you were
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  Speaker 1: talking about, Noel, that's a ding on your score. It's yeah,
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  Speaker 1: it's a weird system.
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  Speaker 2: To jump in here quick.
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  Speaker 4: Actually, I lived with a good friend of mine, his
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  Speaker 4: name's Phil, number of years back, and very fiscally responsible
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  Speaker 4: dude as money saves money, stuff like that. But we
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  Speaker 4: went to get in an apartment and the problem that he
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  Speaker 4: had never had a credit card. This guy who's like,
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  Speaker 4: never believed in debt. He doesn't just he doesn't do it.
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  Speaker 4: And it's just they're like, well, we can't really give
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  Speaker 4: you this apartment. Without the score, and he goes, what,
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  Speaker 4: so I have to like put myself in debt to
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  Speaker 4: get an apartment. Thankfully they were able to just use
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  Speaker 4: my score to get the apartment, but still it was
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  Speaker 4: like it's it's like.
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  Speaker 2: What why are we here?
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  Speaker 1: You get punished for not participating in the system. It's
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  Speaker 1: a very lucrative arrangement for credit institutions and financial institutions.
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  Speaker 1: And we'll see that there's a very valid arguments necessary evil.
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  Speaker 1: But maybe before we really get into it, can we
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  Speaker 1: talk about what a credit score is.
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  Speaker 2: What do we mean when we say credit score?
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  Speaker 3: Yeah, well, your credit score is a three digit number
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  Speaker 3: that is a representation of your fiscal responsibility. Basically, like
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  Speaker 3: you said, Ben, there's a lot of factors. And I
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  Speaker 3: can't recommend credit Karma enough upfront because it does break
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  Speaker 3: down a lot of the stuff for you with no
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  Speaker 3: negative impact for checking it out.
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  Speaker 2: It also can connect you with.
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  Speaker 3: Cards and loan types and lines of credit that you
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  Speaker 3: might qualify for based on your credit score. You know,
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  Speaker 3: it can go from zero to I believe around nine
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  Speaker 3: hundred if I'm not mistaken, Ben, I think that's the
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  Speaker 3: maximum I think a good credit score would be considered
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  Speaker 3: somewhere between six to eight hundred, like eight hundred being excellent.
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  Speaker 3: I think even six fifty six seventy seven hundred is
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  Speaker 3: considered excellent.
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  Speaker 2: Once you get in this seven hundreds, you're you're doing
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  Speaker 2: really well.
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  Speaker 4: I feel like it's weird where it's it's like in
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  Speaker 4: the seven hundreds is where there's like a lot of
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  Speaker 4: change in it. So like upper seven hundreds is like excellent. Well,
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  Speaker 4: lower seven hundreds is like fair.
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  Speaker 2: That's right.
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  Speaker 1: Also, that's where you see a lot of fluctuation too,
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  Speaker 1: because something as small as a like let's say you
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  Speaker 1: have an overdue payment that you missed not because you
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  Speaker 1: didn't have the money, but because you somehow lost track
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  Speaker 1: of something or got forgotten a dino.
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  Speaker 2: Yeah, right, And then.
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  Speaker 1: You can, after having spent so long accreting positive points,
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  Speaker 1: then all of a sudden you're down like thirty points.
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  Speaker 1: And it takes a long so you the mistakes or
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  Speaker 1: the missteps have a greater immediate weight than the success
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  Speaker 1: or the track record of good financial behavior. And that
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  Speaker 1: that is something that has long been a subject of
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  Speaker 1: criticism amid the public because you know, we can understand
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  Speaker 1: that would make somebody feel like the game is rigged. Well.
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  Speaker 3: It's interesting too, because one thing that can have a
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  Speaker 3: really positive impact on your credit score, but also you
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  Speaker 3: have to be careful, is paying off a bunch of stuff.
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  Speaker 3: But if you pay off a bunch of stuff, then
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  Speaker 3: you're no longer utilizing your credit, right, that can have
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  Speaker 3: a negative impact on your credit score, which makes very little.
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  Speaker 2: Sense, you know, from a I don't know reasoning kind
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  Speaker 2: of standpoint.
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  Speaker 4: And then it gets so much worse if you try
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  Speaker 4: to close a credit card out.
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  Speaker 2: Because that shortens your history of credit.
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  Speaker 3: If then God forbid you close a card that you've
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  Speaker 3: had for the longest, that all of a sudden, not
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  Speaker 3: only are you likely to have a high limit on
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  Speaker 3: a card you've carried for the longest, but that also
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  Speaker 3: represents a large portion of your credit history right and
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  Speaker 3: an age.
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  Speaker 1: And it changes your debt to credit ratio. It's weird.
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  Speaker 1: I mean, I can't be the only one amid us
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  Speaker 1: in our fellow ridiculous of storage. As a couple of
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  Speaker 1: zombie credit cards. I've paid them off, I never touched them.
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  Speaker 1: Every blue moon, i'll get a letter from one of
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  Speaker 1: those companies that say, hey, you have to use this
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  Speaker 1: for something or we're going to close it on your behalf,
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  Speaker 1: and so I will go, you know, I will go
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  Speaker 1: make the most ridiculous purchase and then I will aggressively
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  Speaker 1: immediately pay it off. It's such a surreal it's a
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  Speaker 1: black comedy situation.
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  Speaker 3: I recently had a credit account closed, and it was
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  Speaker 3: a Bank of America card, And my oldest credit card
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  Speaker 3: account that I've had since I was like in my
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  Speaker 3: late teens early twenties was a Bank of America cards.
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  Speaker 3: So when I saw that, I freaked out because of
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  Speaker 3: what I was just saying. I knew that if they
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  Speaker 3: had closed my oldest credit account that would really be
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  Speaker 3: a hit on my score. Turns out I had somewhere
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  Speaker 3: along the lines gotten an additional Bank of America card
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  Speaker 3: that they closed, But that kind of made me kind
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  Speaker 3: of perk up and realize, Okay, I got to make
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  Speaker 3: sure that I spend a little something on this long
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  Speaker 3: running account or else it'll get closed.
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  Speaker 2: Exactly.
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  Speaker 1: And for a lot of us, that becomes another bureaucratic
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  Speaker 1: hassle because now you have to remember another thing to
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  Speaker 1: do right. People will suggest you set up a recurring
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  Speaker 1: charge on a card that you never use for a
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  Speaker 1: subscription like Netflix or whatever. But then you have to
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  Speaker 1: also you've given yourself another monthly chore. Anyway, we're speaking
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  Speaker 1: to the choir here. For Americans in the crowd, maybe
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  Speaker 1: the most simplistic way to think of a credit score
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  Speaker 1: is somewhere between a financial version of a report card
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  Speaker 1: and a financial version of a fingerprint.
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  Speaker 3: Or like it's going on your permanent record, like they
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  Speaker 3: always used to say in Nickelodeon's shows.
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  Speaker 1: No, the question is and permanent record is a big
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  Speaker 1: part of this too. The question is why do we
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  Speaker 1: have these things in the first place. We've just spent
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  Speaker 1: the first part of this show complaining about the things
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  Speaker 1: they're wrong with it, and we are correct, but it
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  Speaker 1: is unnecessary.
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  Speaker 2: Evil. You know, you're a US lender.
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  Speaker 1: You have to figure out whether this stranger, this person
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  Speaker 1: you don't know from a can of paint, will actually
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  Speaker 1: pay you back.
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  Speaker 3: Especially if they don't have any tangible assets like a
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  Speaker 3: home or a property or real estate, land, whatever, things
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  Speaker 3: that you can actually measure and say, Okay, this person
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  Speaker 3: has this quote unquote collateral. So that forces folks like
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  Speaker 3: that if they want to play, they got to pay.
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  Speaker 3: They got to get into the system.
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  Speaker 1: Exactly exactly and that's why you can be punished for
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  Speaker 1: not participate pad in the system, for not having a
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  Speaker 1: credit card. In the case of those big purchases, like
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  Speaker 1: you're talking about a car or a house, many people
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  Speaker 1: will not be paying for the thing all at once.
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  Speaker 1: It's just not feasible you'll pay off the full cost
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  Speaker 1: of the asset over some window of time. Is where
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  Speaker 1: you get things like car loans and mortgages. A credit
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  Speaker 1: score helps people figure out whether you are able to
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  Speaker 1: make those payments consistently, and because it incorporates your past
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  Speaker 1: credit shenanigans, it gives these institutions a surprisingly accurate snapshot
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  Speaker 1: of your past and present, all meant to predict your
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  Speaker 1: future actions.
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  Speaker 2: And I didn't know this.
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  Speaker 1: The idea of credit scores is surprisingly recent, which is
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  Speaker 1: nuts because the concept of debt is like five thousand
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  Speaker 1: years old.
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  Speaker 2: That's right.
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  Speaker 3: In fact, in Debt the First five thousand Years updated
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  Speaker 3: and expanded by David Graeber is a fantastic resource for
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  Speaker 3: this exploration. In that work, he explores how for most
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  Speaker 3: of human history, what we would call credit reporting has
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  Speaker 3: been deeply personal, meaning very invasive, and the kind of
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  Speaker 3: thing that would be assessed on a case by case
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  Speaker 3: basis by a lender who often is not going to
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  Speaker 3: be offering a codified set of terms or you know,
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  Speaker 3: interest rates vig let's call it, right. The history of
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  Speaker 3: lending is a history of taking advantage of people, especially
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  Speaker 3: before institutions, you know, for better or worse, swooped in
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  Speaker 3: in more modern times to kind of.
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  Speaker 2: Regulate that kind of stuff.
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  Speaker 1: Yeah, travel back with those folks to the seventeen hundreds
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  Speaker 1: United States for example, or what would become it. If
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  Speaker 1: you're a storekeeper and you want to start a business
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  Speaker 1: or you need a loan, the way you get a
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  Speaker 1: loan is not by filling out a form. You go
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  Speaker 1: to the most successful guy in town, hope you're friends
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  Speaker 1: with them, maybe an authority like a politician or someone
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  Speaker 1: in the religious structure, and you say, hey, will you
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  Speaker 1: go to this banker, this merchant and tell them you know,
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  Speaker 1: I know Phineas. Phineas is a good dude, and he'll
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  Speaker 1: pay you for those beans.
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  Speaker 2: Mm hmmm, like the cut of his jib. That's right,
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  Speaker 2: you really did. It was a vibes.
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  Speaker 3: Based system, ben, as you so astutely put it here.
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  Speaker 3: Beginning in the eighteen twenties, however, credit reporting started to
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  Speaker 3: modernize a little bit.
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  Speaker 2: That's because there were just.
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  Speaker 3: So many businesses and so many business transactions being made,
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  Speaker 3: you know, under a kind of thriving economy that was
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  Speaker 3: beginning to sort of, you know, come into its own
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  Speaker 3: in a very modern way that the old ways just
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  Speaker 3: didn't make sense anymore.
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  Speaker 2: They just didn't hold.
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  Speaker 3: So there were, like I said, there were beginning to
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  Speaker 3: be new laws and regulations in place that would potentially
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  Speaker 3: protect people but also potentially made loans a little bit
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  Speaker 3: of a riskier proposition, because bankruptcy was a thing, meaning
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  Speaker 3: that you could default on loans and not be penalized
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  Speaker 3: for those it would certainly wreck you personally for a time.
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  Speaker 3: Bankruptcy is no joke, but it doesn't mean that people
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  Speaker 3: that have let you that capital are out in the cold.
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  Speaker 1: Yeah, And bankruptcy laws, the new ones that were coming
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  Speaker 1: about at this time, did, as you said, make loans riskier,
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  Speaker 1: and they also provided some manners of protection or some
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  Speaker 1: degree of protection for the people in businesses under those laws.
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  Speaker 1: As a result of this, we see a series of
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  Speaker 1: experiments in trying to standardize what we mean when we
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  Speaker 1: say credit. All these early forays were limited to commercial credit,
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  Speaker 1: loans to businesses to business people, but still they would
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  Speaker 1: later have found implications for consumer credit, which is what
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  Speaker 1: we were both complaining about at the beginning of this show.
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  Speaker 1: There's a great article about this by Sean Trainer writing
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  Speaker 1: for Time, and Sean introduces us to probably the most
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  Speaker 1: important of those experiments in the eighteen hundreds, the Mercantile Agency,
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  Speaker 1: which was created in eighteen forty.
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  Speaker 3: One in the Panic of eighteen thirty seven, a depression
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  Speaker 3: caused by over speculation over extension of line of credits
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  Speaker 3: by merchants essentially borrowing more than they could pay back,
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  Speaker 3: causing kind of a cascading effect of defaults. Tap him
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  Speaker 3: Lewis tappan that you mentioned, decided he needed to systematize
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  Speaker 3: that kind of vibess based form of asking for credit
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  Speaker 3: in terms of, you know, debtors vouching for the borrowers
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  Speaker 3: character and their assets. So he went out doing some
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  Speaker 3: kind of fact finding and soliciting some information from correspondence
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  Speaker 3: throughout the entire country. His agency sort of crystallized all
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  Speaker 3: of this stuff into various reports that were assembled into
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  Speaker 3: massive ledgers that were held in New York City. So
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  Speaker 3: this was essentially the beginnings of a kind of credit
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  Speaker 3: worthiness database.
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  Speaker 1: Yeah, and basically these guys are spies. They're going out
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  Speaker 1: to these other you know, by hook or by crook.
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  Speaker 1: They're going to figure out the stuff they don't want
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  Speaker 1: you to know. Right when it comes to these businesses
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  Speaker 1: and their credit. The Mercantile Agency used these correspondents to,
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  Speaker 1: like we're saying, get information from across the country from
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  Speaker 1: lenders as well as from borrowers.
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  Speaker 2: So it did become a.
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  Speaker 1: Predecessor to a credit reporting agency, but it also went deep.
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  Speaker 1: This is why I say sp vinage and spying. They
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  Speaker 1: would figure out someone's marital status, their ethnic background, their age,
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  Speaker 1: any potential social scandal. They knew about their politics and
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  Speaker 1: their sex lives. And they were super duper biased. The
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  Speaker 1: reporters were primarily white and male, and they had no
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  Speaker 1: they did not hesitate to include their prejudices in their
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  Speaker 1: in their conversations, things zero scruples. They thought that they
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  Speaker 1: were we can only imagine they thought that they were
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  Speaker 1: doing ethical reporting, but it was based on their own,
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  Speaker 1: you know, their own social perspective. There was one credit
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  Speaker 1: reporter from Buffalo, New York who noted quote prudence and
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  Speaker 1: large transactions with all Jews.
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  Speaker 2: Should be used. No, yes, he did not say that.
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  Speaker 1: Yeah, so you know, the argument being, hey, this business
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  Speaker 1: looks good on paper, but I did some digging and
• 16:02
  Speaker 1: I remembered I'm anti Semitic.
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  Speaker 3: That's yeah, just so jacked up too, because there's also
• 16:08
  Speaker 3: the anti Semitic perspective that Jews like are really good
• 16:12
  Speaker 3: with money, you know, like it's it's I just like,
• 16:15
  Speaker 3: it's weird how you can see racist people wanting to
• 16:18
  Speaker 3: have it both ways.
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  Speaker 1: Yeah, you know what I mean, and not even mentioning
• 16:22
  Speaker 1: you know, the the racism against African Americans, right.
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  Speaker 2: Well we should mention it a little bit. Yeah, yeah, yeah.
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  Speaker 3: Another reporter in post Civil War Georgia described a liquor
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  Speaker 3: store owner a G.
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  Speaker 2: Marx.
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  Speaker 3: His business described it as being a low Negro shop.
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  Speaker 1: Gross gross, And this means that there's a much higher
• 16:46
  Speaker 1: likelihood of loans being denied or I would say equally
• 16:51
  Speaker 1: as as probable having very predatory loans extended and saying, hey,
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  Speaker 1: we're the only folks who will play ball with you anyway. Yeah,
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  Speaker 1: this discrimination had profound consequences. Again, first, it reinforced existing
• 17:06
  Speaker 1: social inequalities, just like the later practice that we're all
• 17:10
  Speaker 1: familiar with redlining, which is where in the world of
• 17:14
  Speaker 1: real estate it's a way to systemize racial discrimination. But
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  Speaker 1: this was all still no, this was all still a
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  Speaker 1: collection of rumors. This was a whisper factory. People were
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  Speaker 1: just turn they were getting paid to turn in reports
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  Speaker 1: that were like, uh, this guy is supposed to have money.
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  Speaker 1: People at the local you know, at the local cracker
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  Speaker 1: barrel say he has money. Or people at the local
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  Speaker 1: saloon say he is a real cad, but he's good
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  Speaker 1: at business and it'll pay us back. That's not how
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  Speaker 1: credit reporting should work.
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  Speaker 3: No, And like you know, I mean, there's part of
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  Speaker 3: me that was like, okay, good, good job to try
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  Speaker 3: to pull together some kind of less vibes based, sort
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  Speaker 3: of systematized.
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  Speaker 2: Method for credit reporting.
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  Speaker 3: But really all this did was give the power to
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  Speaker 3: a select few on a much larger scale. Well, at
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  Speaker 3: least before you could like talk to your buddy and
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  Speaker 3: get a loan, you know, whatever your ethnic background was,
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  Speaker 3: if your buddy was cool with you, he'd say good
• 18:24
  Speaker 3: things and then you'd get the lung. But now you've
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  Speaker 3: got people that you can't even see face to face
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  Speaker 3: to make your case, digging and snooping into your business
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  Speaker 3: and adding some pretty gnarly hyperbolic, you know, little twists
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  Speaker 3: to these reports, twists of the knife that are not
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  Speaker 3: really necessarily based in reality.
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  Speaker 1: Yeah, exactly, they're they're kind of pushing their own thing
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  Speaker 1: into the conversation, and people are realizing the problem here.
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  Speaker 1: These are not government agencies. The Mercantile Agency and its rival,
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  Speaker 1: the Bradstreet Company, which is kind of Pepsi to the coke. Here,
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  Speaker 1: their private entities, and people pay for their services. They
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  Speaker 1: are increasingly irritated with this because it's messing.
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  Speaker 2: With their money.
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  Speaker 1: So they say, we want a more simplified, reliable, less
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  Speaker 1: subjective evaluation method. And this creates what our buddy Sean
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  Speaker 1: Trainor calls a pseudo scientific sleight of hand. They said, okay,
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  Speaker 1: we'll take these vibes you're elected and make them into masks. Yeah,
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  Speaker 1: well you've created quantify them. We'll use alchemy that sounds
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  Speaker 1: legit until you learn about it. We'll use that to
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  Speaker 1: make it sound like we have mathematically determined something.
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  Speaker 2: It lends it more credence.
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  Speaker 3: When it's like this number that you can understand or
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  Speaker 3: you can see on paper, say oh okay, that number
• 19:55
  Speaker 3: is high. That might I'm a person must be very reliable,
• 19:58
  Speaker 3: but you still it it hides all of the factors
• 20:02
  Speaker 3: that actually go into what that number is. By design,
• 20:06
  Speaker 3: pioneered by the Bradstreet Company in eighteen fifty seven, commercial
• 20:10
  Speaker 3: credit rating would assume a much more lasting form. In
• 20:14
  Speaker 3: eighteen sixty four, under the Mercantile Agency renamed RG. Dunn
• 20:19
  Speaker 3: and Company, on the very eve of the Civil War,
• 20:23
  Speaker 3: it finalized this numeric system, alphanumeric system that would continue
• 20:29
  Speaker 3: in use well into the twenty first century. The companies
• 20:33
  Speaker 3: later merged like they do, becoming done and Bradstreet a
• 20:38
  Speaker 3: real monopoly.
• 20:41
  Speaker 2: Yeah, very much so.
• 20:42
  Speaker 1: And as as the musician said, you ain't seen nothing yet,
• 20:46
  Speaker 1: but bah bah baby. So this is this is strange
• 20:51
  Speaker 1: because credit scoring factored in a lot of other large
• 20:58
  Speaker 1: scale quantification operas of the time, population management, statistical analysis, espionage.
• 21:05
  Speaker 1: But it was still it was novel in its own
• 21:07
  Speaker 1: right because it had what we could call financial identity,
• 21:13
  Speaker 1: Like you said, a number or an alphanumeric system that says,
• 21:18
  Speaker 1: we're going to summarize everything you need to know about
• 21:21
  Speaker 1: this person. We'll give you the elevator pitch about this person,
• 21:25
  Speaker 1: and that number that rating will change if they suffer
• 21:30
  Speaker 1: what we will call a lapse in fortune or discipline.
• 21:34
  Speaker 1: And the people who loved it had these glowing terms.
• 21:38
  Speaker 1: One guy said, the Mercantile Agency might be well termed
• 21:43
  Speaker 1: Bureau for the Promotion of honesty.
• 21:46
  Speaker 2: Cool. Sure, yeah, full story seems legit now. So by
• 21:51
  Speaker 2: the end of the Civil.
• 21:53
  Speaker 3: War there were these kind of three steadfast pillars of
• 21:57
  Speaker 3: modern credit reporting.
• 21:59
  Speaker 2: Private sector mass surveillance that made credit.
• 22:02
  Speaker 3: Reports possible, a deep, deep bureaucracy involving information sharing, making
• 22:11
  Speaker 3: the rating system widely available, and also accept it by
• 22:18
  Speaker 3: kind of polite society and by you know, big industries,
• 22:22
  Speaker 3: and also made them actionable and acknowledged widely by you know,
• 22:28
  Speaker 3: large corporations, entities that could lend money on a large scale.
• 22:33
  Speaker 2: All of that.
• 22:33
  Speaker 3: So, all of this was still for the purposes of
• 22:36
  Speaker 3: business and not yet for individuals, right ben This would
• 22:40
  Speaker 3: to get to that place would take quite a bit longer.
• 22:43
  Speaker 2: Yeah.
• 22:43
  Speaker 1: Yeah. And the lessons learned in commercial credit evaluation did
• 22:49
  Speaker 1: deeply inform what we call consumer credit today, and the
• 22:55
  Speaker 1: stories are weirdly similar. So, just like with a consumer debt,
• 23:01
  Speaker 1: consumer credit reporting wasn't really a needed thing in early
• 23:05
  Speaker 1: America because there wasn't a density of business propositions. There
• 23:12
  Speaker 1: were fewer people, there were fewer jobs. It was easier
• 23:17
  Speaker 1: for folks to know each other personally. But then by
• 23:20
  Speaker 1: the second half of the eighteen hundreds, the success of
• 23:23
  Speaker 1: the labor movement means there are a lot of people
• 23:26
  Speaker 1: who are working less and making more and they deserved
• 23:29
  Speaker 1: it for the record, and this meant that retailers, including
• 23:34
  Speaker 1: those fancy pants guys at the department stores and in
• 23:38
  Speaker 1: the auto industry, they wanted to get some of that
• 23:40
  Speaker 1: hard earned middle class money. So they made their own
• 23:44
  Speaker 1: credit lines. Your financial reputation, you was a person, became
• 23:49
  Speaker 1: another product from the private market.
• 23:52
  Speaker 3: Yeah, and we delve deep into this in our episode
• 23:55
  Speaker 3: on credit cards, because this really is the kind of
• 23:57
  Speaker 3: advent of the modern credit card. They even like had
• 24:01
  Speaker 3: these sort of like proprietary printed you know whatever.
• 24:04
  Speaker 2: Some of them I think were even like pieces of
• 24:06
  Speaker 2: metal or something.
• 24:07
  Speaker 1: Yeah, that guy who who just wanted to not have
• 24:10
  Speaker 1: to immediately pay cash.
• 24:11
  Speaker 2: For dinner in New York, that's how it started. Yeah,
• 24:14
  Speaker 2: it was a real flex that's true.
• 24:16
  Speaker 3: So the system was, of course, as we've you know,
• 24:19
  Speaker 3: already kind of detailed up to this point didn't really change,
• 24:21
  Speaker 3: rife with misinformation and absolutely.
• 24:25
  Speaker 2: Ripe for corruption and abuse.
• 24:28
  Speaker 3: It definitely paved the way for the coming great depression,
• 24:31
  Speaker 3: which is just not good.
• 24:33
  Speaker 2: Wasn't great at all. It was pretty awful.
• 24:36
  Speaker 3: But it also did help create that middle class that
• 24:41
  Speaker 3: pursuit right that we always talk about of happiness, the
• 24:44
  Speaker 3: idea that you too can live the catalog dream of
• 24:48
  Speaker 3: American life.
• 24:49
  Speaker 2: Give it a go. You could pursue it, my guy.
• 24:52
  Speaker 1: So the men and women who were evaluating consumer credit
• 24:58
  Speaker 1: at these various different retail outfits, they were still decentralized.
• 25:05
  Speaker 1: There was no single dominant firm in charge of this. Instead,
• 25:09
  Speaker 1: these individuals were employed directly by retailers as credit managers,
• 25:15
  Speaker 1: but they were in the know. These were all smart cookies.
• 25:19
  Speaker 1: They picked up the techniques pioneered by those earlier firms,
• 25:22
  Speaker 1: the done Men Bradstreet types. In nineteen twelve, the credit
• 25:27
  Speaker 1: managers get together and form a national trade association and
• 25:31
  Speaker 1: they start comparing notes. How do you best collect, share
• 25:36
  Speaker 1: and codify or uniform eyes information on the people who
• 25:41
  Speaker 1: go to your car dealership or the people who go
• 25:43
  Speaker 1: to seers. It's like the early days of sodopop. There
• 25:46
  Speaker 1: are a lot of things there for a second, and
• 25:49
  Speaker 1: then a lot of.
• 25:50
  Speaker 2: Them fizzle out.
• 25:54
  Speaker 1: Oh right, jeez, But we got to give a shout out,
• 25:59
  Speaker 1: to be a shout out to our fair metropolis.
• 26:03
  Speaker 2: Uh nul.
• 26:03
  Speaker 1: One of the most successful firms in this era was
• 26:08
  Speaker 1: Atlanta's Retail Credit Company.
• 26:11
  Speaker 2: Yeah.
• 26:11
  Speaker 3: The Atlanta Retail Credit Company absolutely left a mark on
• 26:17
  Speaker 3: the idea of credit reporting. It was found in eighteen
• 26:19
  Speaker 3: ninety nine. It developed files on millions of Americans over
• 26:25
  Speaker 3: the span of sixty years, and this information included not
• 26:28
  Speaker 3: just credit data assets character again very vague, but also
• 26:35
  Speaker 3: information on individuals, social, political and yes, sexual lives.
• 26:41
  Speaker 2: Dangerous. He's good with money, but he's a known fraudarist
• 26:45
  Speaker 2: and a communist. Yeah.
• 26:48
  Speaker 1: RCC was kind of like comcasts. They were not popular
• 26:53
  Speaker 1: with the public, but they were very big in their field,
• 26:57
  Speaker 1: and people were increasingly skeptical of their their process.
• 27:01
  Speaker 2: For a long time.
• 27:03
  Speaker 1: For the earliest decades, they were collecting this information, storing
• 27:07
  Speaker 1: it on paper in file cabinets, filing cabinets. But in
• 27:12
  Speaker 1: the nineteen sixties the firm went public with their plan
• 27:16
  Speaker 1: to computerize their records, making them much easier to access.
• 27:20
  Speaker 3: And ben I gotta give you props for this quote
• 27:22
  Speaker 3: you found in the New York Times from Alan Weston,
• 27:25
  Speaker 3: who's privacy advocate from nineteen sixty eight. I feel like
• 27:31
  Speaker 3: he's predicting the future here, almost inevitably. He said, transferring
• 27:36
  Speaker 3: information from a manual file onto a computer triggers a
• 27:39
  Speaker 3: threat to civil liberties, to privacy, to a man's very
• 27:42
  Speaker 3: humanity because access is so simple.
• 27:46
  Speaker 1: Yeah, he feared that digitization would make it impossible for
• 27:51
  Speaker 1: the average person to move beyond past missteps or mistakes,
• 27:55
  Speaker 1: no matter when they occurred, and dantada, he was not
• 28:00
  Speaker 1: far off.
• 28:01
  Speaker 3: Now, he also wasn't the first to make this observation
• 28:05
  Speaker 3: and to make this argument as far back as in
• 28:07
  Speaker 3: nineteen thirty six, Time magazine explored one particular woman's move
• 28:11
  Speaker 3: from Chicago to Los Angeles and how quickly her debts
• 28:16
  Speaker 3: were and dark financial pass well and personal pass were
• 28:19
  Speaker 3: discovered by credit reporters. In this expose, it showed the
• 28:26
  Speaker 3: frightening power of this surveillance state type operation and how
• 28:32
  Speaker 3: incredibly dangerous credit reporting agencies could be for individuals.
• 28:38
  Speaker 2: Yeah.
• 28:39
  Speaker 1: Yeah, and you know, the privacy violations alone are deeply concerning,
• 28:46
  Speaker 1: but also consider this kind of information if computerized, and
• 28:50
  Speaker 1: if there was a way to make it widely available,
• 28:53
  Speaker 1: it could be used to aid and a bet some
• 28:56
  Speaker 1: terrible things like a lot of people who skip town
• 29:00
  Speaker 1: trying to escape domestic violence situations. So what if your
• 29:03
  Speaker 1: abuser can figure out where you have gone and then
• 29:08
  Speaker 1: find you. So this is I mean, that's just one case,
• 29:11
  Speaker 1: but there are a lot of concerns. This computerization also
• 29:15
  Speaker 1: galvanized the moves toward mergers and acquisition and monopolization. In
• 29:21
  Speaker 1: the nineteen sixties, there were more than two thousand credit
• 29:25
  Speaker 1: bureaus across the United States, and by let's see the
• 29:30
  Speaker 1: nineteen eighties, that number had shrunk to five, and then
• 29:35
  Speaker 1: it shrunk to the three major credit bureaus we have today.
• 29:38
  Speaker 3: I had no idea that it was that type of
• 29:41
  Speaker 3: a timeline. Two thousand credit bureau that just seems so
• 29:45
  Speaker 3: untenable because they're all operating with different metrics, you know, Like,
• 29:50
  Speaker 3: I mean, how could you make heads or tails of
• 29:52
  Speaker 3: that with that many credit reporting bureaus, even three, like
• 29:55
  Speaker 3: I was saying at the top of the show, feels
• 29:57
  Speaker 3: a little muddled. They don't agree, they don't agree, But
• 30:01
  Speaker 3: again it is sorry, I can't can't stay enough, if
• 30:03
  Speaker 3: you go to a credit Karma, you can see your
• 30:06
  Speaker 3: two of the major in the top credit reporting bureaus.
• 30:09
  Speaker 3: You can see your score on both of those that
• 30:11
  Speaker 3: kind of compare them and see how various factors play
• 30:15
  Speaker 3: into what that score is for the different bureaus.
• 30:18
  Speaker 1: Yeah, and there's a guy who gets mentioned a lot
• 30:20
  Speaker 1: in these explorations, Josh Louer, who is the author of
• 30:24
  Speaker 1: a book called credit Worthy History of Consumer Surveillance and
• 30:27
  Speaker 1: Financial Identity in America, and he helps shed some light
• 30:32
  Speaker 1: on how this monopolization occurs. He says, look, before the sixties,
• 30:37
  Speaker 1: all the files were in filing cabinets, they were on
• 30:40
  Speaker 1: paper and cards. There were these bureaus that were doing well.
• 30:44
  Speaker 1: They had a lot of money. What they would do
• 30:46
  Speaker 1: is come and find a local or regional credit bureau.
• 30:50
  Speaker 1: They would buy up all their information. They'd acquire that
• 30:53
  Speaker 1: smaller interest than they would computerize it and add it
• 30:56
  Speaker 1: to their dragon's hoard of data.
• 30:58
  Speaker 2: Is any of this sound familiar, y'all, like banking? No?
• 31:02
  Speaker 3: No, just the idea of like your personal data being
• 31:05
  Speaker 3: bought and sold and traded like Pokemon cards, Like it's
• 31:10
  Speaker 3: not new.
• 31:12
  Speaker 4: When we were going through like that, earlier or what
• 31:14
  Speaker 4: they're talking about, like you know, your sex life, ethnicity.
• 31:16
  Speaker 4: I'm like, I'm listening to this. Sounds like Facebook to me,
• 31:20
  Speaker 4: information era like level stuff.
• 31:22
  Speaker 3: Just definitely exactly, that's the term I was thinking of
• 31:25
  Speaker 3: max data mining, but like you know, and then the
• 31:27
  Speaker 3: whole idea of changing the credit reporting to something that's
• 31:31
  Speaker 3: more fact based and less you know, perhaps personal information based.
• 31:38
  Speaker 2: Sure that's how that industry evolved.
• 31:41
  Speaker 3: Perhaps, but then you still have you know, all of
• 31:43
  Speaker 3: the social media stuff and all that information floating out there,
• 31:46
  Speaker 3: and it can't not have an impact I would imagine,
• 31:49
  Speaker 3: you know, on things like insurability for example. You know,
• 31:52
  Speaker 3: if you have images out there of yourself doing certain things,
• 31:56
  Speaker 3: your insurance company could catch way to that and drop you,
• 31:58
  Speaker 3: drop you from your policy.
• 32:00
  Speaker 2: I mean, you know, this stuff that has real world implications.
• 32:02
  Speaker 1: And that's important to know, especially for all of our younger,
• 32:06
  Speaker 1: ridiculous historians in the crowd. The streets are in a
• 32:10
  Speaker 1: very real way watching and the erosion of privacy is
• 32:16
  Speaker 1: a real thing. It is being used against you, so
• 32:19
  Speaker 1: be very careful what you post. The dopamine rush from
• 32:23
  Speaker 1: likes and clicks is not worth it.
• 32:25
  Speaker 2: So this is that's had a little honest as you
• 32:28
  Speaker 2: but accorate. Yeah, but the individual results may vary. You know.
• 32:32
  Speaker 3: I've kind of chosen to be a one platform kind
• 32:35
  Speaker 3: of guy. I'm Instagram all the way, and I've curated
• 32:38
  Speaker 3: my algorithm to feed me lots of nice food pics
• 32:41
  Speaker 3: and art stuff and travel things, and I don't think
• 32:45
  Speaker 3: I put too too much personal information out there.
• 32:48
  Speaker 2: I'm pretty comfortable with the balance that I've struck.
• 32:50
  Speaker 1: I'm on Instagram as well. I'm on several of those platforms,
• 32:54
  Speaker 1: just primarily to interact with authors I like, and then.
• 32:58
  Speaker 2: Being public facing. Fok.
• 33:00
  Speaker 1: I gotta say, one of the best things you can do, folks,
• 33:03
  Speaker 1: just very quick opsect not to get too stuff. They
• 33:05
  Speaker 1: don't want you to know if you're traveling, don't post
• 33:09
  Speaker 1: specifics about you traveling until after you're back home safe.
• 33:14
  Speaker 1: Just don't do it. That's how you get got anyway.
• 33:18
  Speaker 1: This outcry of computerization of an information state emerging in
• 33:24
  Speaker 1: the private industry. This resulted in some legal action, thankfully,
• 33:29
  Speaker 1: most notably the Fair Credit Reporting Act of nineteen seventy,
• 33:33
  Speaker 1: which said, look, if you're a bureau you can't keep
• 33:37
  Speaker 1: black boxing stuff. Open your files to the public. You
• 33:40
  Speaker 1: also have to expunge data on race, sexuality or disability,
• 33:46
  Speaker 1: and after a certain window of time you have to
• 33:48
  Speaker 1: delete some negative information. That's where we get the old
• 33:51
  Speaker 1: trope of like this stays on your report for you know,
• 33:54
  Speaker 1: seven years or wherever. Clark Howard says.
• 33:56
  Speaker 2: Those hard inquiries. I forget the exact now.
• 33:59
  Speaker 3: I think is a variable, but I think it's up
• 34:01
  Speaker 3: to two years, and they can drop off quicker than that,
• 34:04
  Speaker 3: depending on other factors, some of which are not as
• 34:07
  Speaker 3: obvious as maybe one would like. But I think it's
• 34:10
  Speaker 3: wild that we didn't have a Fair Credit Reporting Act
• 34:13
  Speaker 3: until nineteen seventy. Up to that point, as you could
• 34:17
  Speaker 3: probably imagine, with those two thousand agencies, it was an
• 34:20
  Speaker 3: absolute free for all, you know, like truly a period
• 34:24
  Speaker 3: of zero.
• 34:25
  Speaker 2: Oversight, wild West kind of stuff.
• 34:27
  Speaker 3: So this was a really big deal, the idea that
• 34:30
  Speaker 3: you could no longer use things like race, sexuality, disability
• 34:34
  Speaker 3: as a metric for someone's credit score, which I think
• 34:37
  Speaker 3: is a huge deal.
• 34:37
  Speaker 2: But it certainly did not end credit reporting. No, no, no,
• 34:50
  Speaker 2: it put gas on the fire.
• 34:52
  Speaker 1: Our buddies in Atlanta RCC, they got the risk slapped
• 34:57
  Speaker 1: in congressional hearings but as result, they didn't go under.
• 35:01
  Speaker 1: They changed their name to Equifax in nineteen seventy five,
• 35:05
  Speaker 1: and they kept going with the with the worship of
• 35:09
  Speaker 1: the algorithm and computerization. I do want to know another
• 35:13
  Speaker 1: thing that shows us how close history is. It wasn't
• 35:18
  Speaker 1: until the Equal Credit Opportunity Act of nineteen seventy four
• 35:22
  Speaker 1: that unmarried women could get credit cards largely banks can
• 35:28
  Speaker 1: refuse them. So good things came about with these with
• 35:32
  Speaker 1: this outcry and with this legal action, but the pace
• 35:37
  Speaker 1: of hoovering up data only accelerated. This is where you know,
• 35:41
  Speaker 1: later we get Experience and TransUnion. Those are the big
• 35:44
  Speaker 1: three we talk about. But they're still doing better. They're
• 35:50
  Speaker 1: just not.
• 35:52
  Speaker 2: Perfect.
• 35:53
  Speaker 1: They're deeply imperfect. Like you said, they don't always agree
• 35:57
  Speaker 1: with each other. It can be tough to interpret and
• 35:59
  Speaker 1: compare their reports too.
• 36:01
  Speaker 2: That is very true.
• 36:03
  Speaker 3: And I also do want to play on I know
• 36:04
  Speaker 3: I've been beating the drum for credit karma. I did
• 36:07
  Speaker 3: once and I'll never do this again. I think for
• 36:10
  Speaker 3: my next car purchase, I'm gonna do like Carvon or
• 36:12
  Speaker 3: one of those zero dealership. I just don't want to
• 36:16
  Speaker 3: do a deal. I don't like dealerships. I don't like
• 36:18
  Speaker 3: the way they treat you. I don't like the way
• 36:19
  Speaker 3: they bait and switch you. Sorry, if there's anyone out
• 36:22
  Speaker 3: there that's a car dealer, and you correct me if
• 36:25
  Speaker 3: I'm wrong, Maybe there's good ones, but my experience has
• 36:27
  Speaker 3: been not good, very high pressure, very like. I literally
• 36:33
  Speaker 3: had someone say to me, Oh, you didn't tell me
• 36:35
  Speaker 3: you wanted the lowest interest, right, are you?
• 36:38
  Speaker 1: What?
• 36:39
  Speaker 2: Like? Isn't that like understood anyway?
• 36:41
  Speaker 3: I basically had to negotiate after they gave me a
• 36:43
  Speaker 3: crappy offer. I had to be like, no, you've got
• 36:45
  Speaker 3: to do better than that. But they did tell me
• 36:48
  Speaker 3: that they gave me my scores and they were close
• 36:52
  Speaker 3: to what credit Karma said, but not exact.
• 36:55
  Speaker 2: They were a little bit lower.
• 36:57
  Speaker 1: They're also different internal scores that financial institutions may use
• 37:03
  Speaker 1: to rank you that you will not generally see because
• 37:06
  Speaker 1: they're not for the public. But the Big Three that
• 37:09
  Speaker 1: triumvirt of credit has attempted to resolve some of their
• 37:14
  Speaker 1: larger discrepancies. So they joined forces and possied up with
• 37:18
  Speaker 1: a tech company to create a credit scoring algorithm. This
• 37:22
  Speaker 1: company's name Fair Isaac and Company. You may know them
• 37:27
  Speaker 1: by their street name Fiico.
• 37:29
  Speaker 2: That's orry.
• 37:29
  Speaker 3: I found that in nineteen fifty six, the firm already
• 37:32
  Speaker 3: been selling algorithms, selling the aforementioned to credit score algorithms
• 37:36
  Speaker 3: for decades when the Big Three started their quest for
• 37:41
  Speaker 3: industry domination and for standardization of credit scores. So the
• 37:46
  Speaker 3: results which hit the market in nineteen eighty nine was
• 37:50
  Speaker 3: very similar to the very algorithm we still see today.
• 37:54
  Speaker 3: And it spread because I would say, up to this point,
• 37:58
  Speaker 3: it was the best, It was the best one, it
• 38:00
  Speaker 3: was the most equitable one, it.
• 38:02
  Speaker 2: Was the least bad. Kay, fair enough, Yeah.
• 38:06
  Speaker 1: And this spreads like wildfire. Today, nearly everyone in America
• 38:12
  Speaker 1: has a codified financial identity of some sort. It's really
• 38:16
  Speaker 1: tough to live entirely off the grid. It's simply a
• 38:19
  Speaker 1: reality of American life, and history reminds us yet again,
• 38:24
  Speaker 1: as common as that seems now, credit scoring is not universal.
• 38:28
  Speaker 1: People in the past were definitely correct to worry about
• 38:32
  Speaker 1: the concentration of power in the hands of these secretive
• 38:35
  Speaker 1: private organizations. And it's nuts because we don't talk about
• 38:42
  Speaker 1: it often, but these credit companies had to regularly defend
• 38:46
  Speaker 1: themselves against charges of espionage. People even called them the
• 38:51
  Speaker 1: new inquisition at times for their snoopiness, their snoopy dupes.
• 38:55
  Speaker 1: But this is also still even now. It's a way
• 39:01
  Speaker 1: of maintaining social hierarchy, maybe not by design, but in practice,
• 39:05
  Speaker 1: because you can create these very dangerous, damaging feedback loops
• 39:10
  Speaker 1: of credit. Especially if you are a poorer American, your
• 39:15
  Speaker 1: lower credit score will translate to bigger down payments, higher
• 39:19
  Speaker 1: interest rates on purchases. It's expensive to be poor. And
• 39:23
  Speaker 1: then if you have this extra knock on strain added
• 39:28
  Speaker 1: to your household budget, it raises your likelihood of having
• 39:32
  Speaker 1: bankruptcy and defaulting on your loans. And what does that do,
• 39:35
  Speaker 1: ding ding ding? It lowers your credit score even more.
• 39:39
  Speaker 3: See I'm looking at my scores right now, TransUnion and Equifax.
• 39:42
  Speaker 3: Is what credit Karmas shows. My TransUnion score is up
• 39:45
  Speaker 3: nine points, but my Equifax score is down thirteen points.
• 39:49
  Speaker 3: It's like it's a mystery. And then there are things
• 39:52
  Speaker 3: that it can show. But why did it affect one
• 39:54
  Speaker 3: one way and the other another way? And we will
• 39:57
  Speaker 3: help you guys out with a little bit of a
• 39:59
  Speaker 3: de tail around how that FICO score?
• 40:02
  Speaker 1: See what change determined? Yeah, you and click see what changed?
• 40:05
  Speaker 1: And I'm a fan of credit harma as well. You
• 40:08
  Speaker 1: know they're not paying us to say this. This is just,
• 40:11
  Speaker 1: I think, a very accessible resource for those of us
• 40:15
  Speaker 1: who are lay folk, who are not wizards of financial formula,
• 40:20
  Speaker 1: nor sorcerers of something else that begins with an S
• 40:24
  Speaker 1: for the alliteration.
• 40:25
  Speaker 2: We'll keep it in like that boy, I'm under the
• 40:28
  Speaker 2: weather anyway. So is this imperfect? Absolutely? Is it potentially dangerous?
• 40:32
  Speaker 2: For sure?
• 40:34
  Speaker 1: But as ridiculous as the origins may be, the credit
• 40:38
  Speaker 1: score still fills a modern need because the alternative would
• 40:43
  Speaker 1: be going back to the days of old. You have
• 40:45
  Speaker 1: to rely on personal relationships. You need money for your business.
• 40:49
  Speaker 1: You better hope you're cool with the people in town
• 40:53
  Speaker 1: who already run everything, because they're the ones who approve you. Also,
• 40:57
  Speaker 1: credit scores give us a good read on society. Overall.
• 41:01
  Speaker 1: It helps us see the financial forest, you know. Credit
• 41:06
  Speaker 1: like large trends and credit reports are used to inform
• 41:09
  Speaker 1: decisions about housing and insurance, cost, utilities, et cetera, et cetera,
• 41:14
  Speaker 1: et cetera. So I don't know, I'd see ridiculous beginning,
• 41:19
  Speaker 1: still kind of a ridiculous thing, necessary evil. Maybe we
• 41:24
  Speaker 1: can end with a little bit of demystification, we did
• 41:28
  Speaker 1: find out some of the ratio of what makes a
• 41:31
  Speaker 1: FICO credit score.
• 41:33
  Speaker 3: Yes, unlike other credit reporting scoring methods of yesteryear, age, gender,
• 41:40
  Speaker 3: marital status, all of that, as we mentioned, no longer considered.
• 41:43
  Speaker 3: Instead we look at what they look at five factors
• 41:46
  Speaker 3: to calculate an individual's FYCO credit score, and maybe we
• 41:50
  Speaker 3: round robin this one. Then Number one, which can affect
• 41:54
  Speaker 3: thirty five as a thirty five percent effect on your
• 41:57
  Speaker 3: credit score is payment history. The anyone could probably think
• 42:01
  Speaker 3: that's probably the most important factor. If you're getting behind
• 42:03
  Speaker 3: on your payments, if you're defaulting on payments, getting collections
• 42:07
  Speaker 3: taken out against you, that is not going to be good.
• 42:08
  Speaker 3: So that is the number one factor of determining that
• 42:12
  Speaker 3: FICO score, whether or not you've paid past credit accounts
• 42:16
  Speaker 3: on time.
• 42:17
  Speaker 1: Number two, how much do you owe? That's thirty percent
• 42:21
  Speaker 1: of your grade. Here the total amount of credit and
• 42:24
  Speaker 1: loans you are currently using compared to your total all
• 42:29
  Speaker 1: in credit limit, counting all your cards, counting all the debts,
• 42:34
  Speaker 1: all the assets. This is known as your utilization rate
• 42:38
  Speaker 1: and real quick note her FICO scores. The typical score
• 42:45
  Speaker 1: ranges from three hundred to eight to fifty eight fifty
• 42:48
  Speaker 1: I was close. I said nine hundred. You can get
• 42:50
  Speaker 1: a nine hundred score with something called vantage score, but
• 42:53
  Speaker 1: not really with FICO. It's kind of like those professors
• 42:56
  Speaker 1: who and I know some of these professors who on
• 42:59
  Speaker 1: the first day the class tell you no one gets
• 43:01
  Speaker 1: an A in their class.
• 43:02
  Speaker 2: Oh what a flex don't care for that. I don't
• 43:05
  Speaker 2: love it. Yeah, I don't care for you. Number three length.
• 43:08
  Speaker 3: We've mentioned all of these in passing in one by
• 43:11
  Speaker 3: one point or another. I believe maybe minus number five,
• 43:13
  Speaker 3: which we'll get to. But number three length of credit history,
• 43:16
  Speaker 3: which has a fifteen percent impact on your FICO score,
• 43:19
  Speaker 3: And that says it all in the name the length
• 43:22
  Speaker 3: of time that you've held these various credit accounts, and
• 43:25
  Speaker 3: it's averaged. I was just talking off Mike about how
• 43:28
  Speaker 3: I was looking at mine. My average credit age is
• 43:33
  Speaker 3: five years, but that Bank of America card I mentioned earlier,
• 43:36
  Speaker 3: I've had for eighteen years. So it's an average of
• 43:40
  Speaker 3: all of the various accounts. So if you have a
• 43:42
  Speaker 3: very old account, but then you've applied for a bunch
• 43:45
  Speaker 3: in recent times, that will lower the average age of
• 43:49
  Speaker 3: your credit history. So do be careful there, but again
• 43:52
  Speaker 3: only a fifteen percent hit, so not a massive factor.
• 43:55
  Speaker 1: Number four and so if we go to number four,
• 43:58
  Speaker 1: this is one we hadn't mentioned. And as explicitly you
• 44:02
  Speaker 1: heard us talk about soft via hard inquiries on credit.
• 44:07
  Speaker 1: The reason that affects your credit score is because new
• 44:10
  Speaker 1: credit new credit is ten percent of your grade. And
• 44:15
  Speaker 1: new credit maybe a misleading term there. It's not just
• 44:19
  Speaker 1: how often you open new accounts, it's how often you
• 44:22
  Speaker 1: attempt to open new accounts, how often you apply for
• 44:25
  Speaker 1: something which creates that hard inquiry which helps the system understand, hey,
• 44:31
  Speaker 1: why is this person Johnny Blue Jeans out in Omaha?
• 44:35
  Speaker 1: Why did they just apply for ten credit cards?
• 44:38
  Speaker 3: Now that being said, ben I did find something out
• 44:41
  Speaker 3: in some research that if you are shopping around for
• 44:44
  Speaker 3: a major loan or a major mortgage type thing or
• 44:48
  Speaker 3: a car offer, a loan like that, you only get
• 44:52
  Speaker 3: hit like once. It does determine if you do it
• 44:56
  Speaker 3: within a period of time. I don't know exactly how
• 44:58
  Speaker 3: this is determined, but you're not gonna have all seven
• 45:00
  Speaker 3: of those hard inquiries stay on your account limited because
• 45:05
  Speaker 3: you shocked around and they understand that.
• 45:06
  Speaker 2: So I don't know exactly how that's determined.
• 45:09
  Speaker 3: You can report hard inquiries that are made in error
• 45:13
  Speaker 3: that you believe to these bureaus and potentially have them removed.
• 45:18
  Speaker 2: Good luck with that.
• 45:19
  Speaker 3: I would argue the bureaucracy behind these organizations is probably
• 45:23
  Speaker 3: pretty thick.
• 45:24
  Speaker 2: Yeah.
• 45:25
  Speaker 1: And it's also you know, the standing position for your
• 45:29
  Speaker 1: credit should be to have your credit frozen and unfreeze
• 45:33
  Speaker 1: it when you want. Anyway, here's number five. This is
• 45:38
  Speaker 1: an important point. They're not looking at just the amount
• 45:41
  Speaker 1: of debt to credit you have, not just your utilization,
• 45:45
  Speaker 1: but the kind of credit you have. Credit cards are
• 45:49
  Speaker 1: different from installment loans, which are different from mortgage loans.
• 45:53
  Speaker 1: So all of that goes into effect to keep this
• 45:56
  Speaker 1: crazy thing we call modern americanists society sort of afloat
• 46:01
  Speaker 1: until something goes wrong. I declare the verdict on credit
• 46:06
  Speaker 1: scores ridiculous. Oh necessary. I hate to say it, but
• 46:11
  Speaker 1: the last.
• 46:12
  Speaker 3: I completely agree. Yeah, and back to just really quickly,
• 46:15
  Speaker 3: back to that credit mix. That's interesting, isn't it. Ben
• 46:19
  Speaker 3: Like you get like a boost for how like it's
• 46:22
  Speaker 3: almost like having a portfolio, you know, because on the
• 46:25
  Speaker 3: one hand, people, if you're thinking about debt in one way,
• 46:29
  Speaker 3: it's bad nobody wants to be carrying a bunch of debt.
• 46:31
  Speaker 2: But when you get to a certain point financially in
• 46:34
  Speaker 2: your life, you want to carry debt.
• 46:37
  Speaker 3: It's good to carry a mortgage because it boosts your
• 46:39
  Speaker 3: credit score.
• 46:40
  Speaker 2: So like the idea of.
• 46:42
  Speaker 3: You know, some people will be like, oh, I should
• 46:43
  Speaker 3: I pay my house off early? The answer there by
• 46:47
  Speaker 3: some financial experts would be no, because then you're getting
• 46:51
  Speaker 3: that off of your credits report, and that's not good
• 46:54
  Speaker 3: for you long term. So to carry a large note
• 46:57
  Speaker 3: like that on your credit report is a good thing,
• 46:59
  Speaker 3: and it's that you're capable of making those payments as
• 47:02
  Speaker 3: opposed to you know, making one lump sum or whatever.
• 47:04
  Speaker 3: So again I'm not an expert here. This is what
• 47:06
  Speaker 3: I have been told, so your information may be different,
• 47:09
  Speaker 3: and please do let us know if I'm absolutely full
• 47:11
  Speaker 3: of crap.
• 47:11
  Speaker 2: But it's something that I was told.
• 47:13
  Speaker 1: And that credit mix up is ten percent of your
• 47:17
  Speaker 1: overall grade. Those are the big factors, and you can
• 47:19
  Speaker 1: see already they can interact with one another in quite
• 47:23
  Speaker 1: complex ways. Another another kind of debt that would be
• 47:27
  Speaker 1: under a special umbrella would be things like student loans,
• 47:31
  Speaker 1: you know what I mean, which are often already wrapped
• 47:33
  Speaker 1: up in governmental actions, so we hope this finds you
• 47:39
  Speaker 1: in good health and amid grand adventure.
• 47:41
  Speaker 2: Folks. Thanks for tuning in.
• 47:43
  Speaker 1: Thanks as always to our super producer mister Max Williams.
• 47:47
  Speaker 2: Thank you to Jonathan Strickland.
• 47:49
  Speaker 1: Aka the Quister aka the Ridiculous History Credit Correspondent. He's
• 47:55
  Speaker 1: coming to spy on you in a town nearby the RHCC.
• 48:00
  Speaker 2: That's what he is. That's right, Hughes.
• 48:02
  Speaker 3: Thanks Chris Frosciotis and Neves Jeff Coots here in spirit.
• 48:04
  Speaker 2: What do we say we got the quizzor well, how
• 48:07
  Speaker 2: about the puzzler?
• 48:08
  Speaker 1: A J.
• 48:08
  Speaker 2: Bahamas Jacobs Big thanks to.
• 48:09
  Speaker 1: You as well, Bud Big, Big thanks to Alex Williams
• 48:13
  Speaker 1: currently BiVO whacking out there in Austin. Safe travels, Bro,
• 48:17
  Speaker 1: You're an excellent composer. And Noel Big thanks to you.
• 48:20
  Speaker 2: And you as well. Let's see you next time, folks.
• 48:29
  Speaker 3: For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts,
• 48:33
  Speaker 3: or wherever you listen to your favorite shows.