The Richmond Register

May 18, 2013

Credit score insanity

By Don McNay
Register Columnist

RICHMOND — I hope that it's only amnesia

Believe me I'm sick but not insane



— Pousette-Dart Band

Frequently, people stop me and ask me personal finance questions.

The most common is how to improve their credit history score.

If you need to improve your credit score, it means you have lousy credit. Before fixing the score, people need to ask how their credit got so bad to begin with.

Some would be better off not having access to credit at all. They can’t handle it.

I’m not talking about people who got behind because of medical bills, life emergencies or unemployment. Those are people with a good credit history and had something bad happen. They deserve a second chance.

I’m focused on the other category, people spending beyond their means or spending money on stupid stuff.

I don’t want them to have access to credit. If they do, they will get in trouble again.

They need to figure out how they got in trouble the first time.

It is like a person who jumps from a six-story window and survives. If they don’t learn a lesson, they will go to the eighth floor and jump again.

Eventually they splatter themselves on the pavement. The same holds true with finance. Before people crash, they need to look at themselves and understand some basic principles.

I tell people to spend less, pay for things in cash, start budgeting and write down everything that they spend.

They need to understand the difference between needs and wants. People need food, clothing and shelter. They don’t need the latest iPod or video game. They may not even want it badly but bow to peer pressure.

People get into trouble trying to keep up with friends and neighbors who make stupid spending decisions.

Once that spirals starts, it rarely quits. People spend all of their lives trying to keep ahead of creditors.

And think that getting more credit is their answer.

My sound advice rarely goes anywhere. Particularly with those out to impress their buddies.

There are a lot of suckers out there. And people wanting to take advantage of them.

If you have a lousy credit rating, there are a host of high-interest credit card issuers, check cashing companies and payday lenders dying to get their hands on you. They will give you more debt and more bills to pay.

A cottage industry has developed in companies claiming they can improve people’s credit scores.

I’ve never seen these companies have real success. They prey on suckers looking for quick and easy solutions. Since the companies charge a hefty fee, they get debtors even further into debt.

There are two simple ways to improve your credit score. One is to pay your bills on time. The second is to not have as many debts. If you don’t have many creditors, it is easy to handle what you have.

I give that advice often. I then watch people’s eyes glaze over.

If I would turn evil and offer them an easy credit fix, I’d be a billionaire.

It is not easy to get people to take a hard look at themselves. Addiction to credit is like addiction to anything else, people usually won’t get help until they bottom out.

When people with poor credit get themselves together, they often get amnesia about what got them in trouble. They make the same mistakes over and over.

That is not amnesia. That is insanity.