Most people believe they must maintain a good credit score and that having a good credit score is a social signal that they are financially responsible. The truth is exactly the opposite.
All fiat money created by central banks and the treasury is debt. When someone swipes their credit card or takes a loan, new money is created by the banking system and loaned to the consumer. It’s money that isn’t backed by anything other than legal tender laws that compel you to use it. They are just entries in a database or pieces of paper with drawings on them, for all intents and purposes, they are counterfeit. The same as you or I or any counterfeiter would do at home, the central banks and the treasury do by legal proclamation.
When the consumer pays the debt off, the principal is deleted from the accounting books, destroyed, and the bank keeps the interest. The counterfeit has been laundered and the counterfeiters keep the profits. This has concerning consequences for the banks such as: if all debt were paid off, there’d be no more money in circulation. So how do they ensure that people keep borrowing? The invention of the credit score.
A good credit score requires a perpetual state of indebtedness and repayment. The more you borrow and payback (i.e. the more interest you generate for the banks) the higher your credit score. The less you borrow (i.e. the less interest you generate for the banks), the lower your credit score. In other words, if you are financially responsible and don’t buy things you can’t afford, live within your means you will have a lower credit score like that of someone who borrows a lot and doesn’t pay it back. Those who judge you based on your credit score don’t take this into consideration. It’s a false dichotomy, you either have a high credit score or you don’t, the reasoning is irrelevant. Credit scores have become so prevalent that they are used in almost all facets of society as a judge of one’s character similar to the Chinese social credit score. Credit scores are considered when applying for a job, renting an apartment, requesting utility services, buying insurance and even a phone plan.
However, if you are so financially irresponsible that you are perpetually in debt, if you chronically buy things you can’t afford, if you live beyond your means you will have a high credit score and be considered a responsible member of society. In fact it’s fair to say that the more interest you generate for the banks, the higher your credit score. If you deprive the banks of interest income, the lower your credit score. And the banks have the government on their side. An institution $32 trillion in debt will punish you for not paying your debt to the banks. It’s a perversion that bears no resemblance to reality.
Consumers are trapped by this mindset even though they have no idea how a credit score is calculated. They just know they must be in constant debt and pay it off faithfully. Nor is one’s credit score under their control. Any business can report you to a credit bureau for anything they choose and there’s very little you can do about it. Were you late with the rent? The landlord can report you. Did you move and forget to cancel your contract with the electric company? They can report you. Businesses and those who stand to profit can unethically leverage credit bureaus to their advantage. They report outright lies as a form of extortion to pressure people into paying even if they don’t owe it and there’s nothing you can do about it.
That’s why credit cards are so prevalent and seen as a symbol of success. The gold card, the platinum card, American Express. That’s why college seniors with no job prospects receive applications for pre-approved credit cards. That’s why people swipe their credit card for benign purchases like a Big Mac or a pair of socks.
People are as addicted to their credit cards as they are to their phones. You want to get back at the bankers, the billionaires? Stop using your credit card, live within your means, be financially responsible and stop being a slave to your credit score.