If you’ve ever checked your credit — maybe after the massive Equifax data breach, for example — and been pleasantly surprised by your score, you are in good company. This year, FICO, the arbiter of one of the widely-used credit scoring algorithms, released a report that stated that Americans were doing pretty well with their credit. The average score was over 700 out of 850 — considered “solidly good,” and a marked improvement over the 686 average that came out of the housing crash.
And while, in the decade since the peak of the recession, many Americans have taken big steps to clean up their credit, others have not — because they have been unable. Because credit — a super-secret rubric determined by a handful of private equity organizations — isn’t really about how much money someone has, how well they spend it or even whether they’ve been financially responsible. Instead, a credit score is designed to reward people for borrowing money and paying it back.
A credit score is designed to reward people for borrowing money and paying it back.
Young people are often dinged because their credit history isn’t long enough. Taking out money for student loans is good ... until you get caught in the cycle of interest increases. And some types of credit — like a mortgage — are more positive than others, such as retail credit cards.
All of which means that credit is, by its very nature, determined more by class, access and income level than responsibility. And yet, it’s used all the time to determine how good someone is with money.
Credit is, by its very nature, determined more by class, access and income level than responsibility.
Landlords often use credit scores as a shorthand for financial responsibility, assuming that good credit must mean a tenant will pay their rent on time and incur few damages. In reality, a credit score has little to do with how courteous a person is. To develop and maintain a high credit score — and thus, get better rates on credit cards or loans — all you’d really need is money to begin with and a constant stream of it to keep making payments.
For minimum-wage workers, unbanked folks, those who can’t afford to stash their cash or those who work seasonal or under-the-table jobs, that’s just not possible. And once you’re stuck in the loop of poor credit, it’s nearly impossible to get out without an influx of cash and stability.
In a lot of ways, credit is like any other financial institution — it was built to prioritize people with means and to incentivize the kinds of buying and spending habits they demonstrate. Credit wasn’t designed to provide an opportunity to those who didn’t have one; it was designed to filter out the haves from the have-nots — and let the haves have even more.
Hanna Brooks Olsen is a writer and policy consultant. Her work has appeared in The Atlantic, The Nation, Salon, Fast Company and Vice. View previous Access Denied columns.
Read the full Jan. 2 - 8 issue.
Real Change is a non-profit organization advocating for economic, social and racial justice. Since 1994 our award-winning weekly newspaper has provided an immediate employment opportunity for people who are homeless and low income. Learn more about Real Change.