Credit Ratings - Arbitrary or Systematic?

The basics of the credit score are known to be:

1. Amount of credit limit vs. the amount you've charged (lower the ratio, the better)
2. Length of credit (more years with the same credit card or loan paid on time helps)
3. Types of credit (diversification (student loans, mortgages, credit cards, etc) and good managment of payments

and more variables to determine the rate, monthly premium, and limit for additional credit coverage.

But according to a recent suit filed by the FTC on June 10th - there may be more to it thank you first thought....

According to BusinessWeek (6/30/08) some credit card companies may be incorporating purchasing behavior into this equation as well. The article "Your Lifestyle May Hourt Your Credit" includes spending on massages, bars, counseling, etc to determine if your credit should be limited in the risk associated with frivolous spending according to a particular credit company.

It seems possible to me, considering we consider each others actions in developing an assessment of the situation. So why not! Friends may not lend friends money based on their friend's actions....

HOWEVER, this could turn predatory if facts considered show increased usage of "gay" or ethnic barriers in extending credit. In addition, how do you make this into a formula?

'Ohhhh... Bobby Blank went to the bar 7 times....bad bad' How do you calculate a point reduction consistently across all applicants? This subjective practice is something to look out for for sure....

stay safe! stay sane! enjoy your holiday!!

with the synergy of mind and body - we can accomplish anything!

Hey Guys! I've previously posted a blog for Student Financial Planning and finally decided there are many issues for graduates that more "settled" individuals may not face.
Whether you are thinking about starting to save, invest, make larger purchases, etc now in your 30s - this blog will go into more detail on specific issues I've come across in life and my years of strange experience at a younger age.
I achieved my Texas Real Estate Salesperson's License at age 18.
I did book keeping for three different small businesses for the first 3 years of college.
I fell in love with tax accounting and individual taxation in a new job my 4th year, but felt something was missing working for high net worth clients. So I decided to share my knowledge of balancing accounting for yourself, the effects of government in your daily life, and other crazy random thoughts! I hope you enjoy the future posts to come...

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