Elusive Wealth

This is my second “Voting with Dollars” post. The first post covered Banking.  When it comes to money and specifically in a capitalist or moderately capitalist society, our actions speak volumes. For instance, we want better service when banking and higher interest rates from our banks, but the vast majority of people continue to use the monolithic banks.

The credit bureaus are a bit different — we do not directly use them like banking or other services, unless it is to get a copy of our credit report. However even here, our actions helped lead us to the credit bureaus we have today. And there are some things we can do to change how they work in our favor without additional legislation — but no doubt it is a long difficult process.

Avoid Debt

Just like in choosing how to bank, avoiding debt is the key way we can influence how credit bureaus work. One of the common complaints on Dave Ramsey’s show, for instance, is that without a credit score or a credit card certain products are unavailable or more expensive. Examples include cell phones, apartments, rental cars, some hotels, insurance and home loans. It is true, with a poor credit score and/or no credit cards, insurance premiums go up, deposits are required for cell phones, and home loans are significantly more difficult to get. This is all because credit scores work! The key to changing this behavior is to cause credit scores to be a poor, or maybe more achievable, a mediocre way to assess ability to pay.

Credit scores are so effective because so many people are in debt. If we can steer the masses away from debt toward cash, most of these groups will need to find other ways to assess ability to pay.  But assuming we could get the masses debt free, then some of the extra costs do not matter as much. Deposits for cell phones are really no issue (because you have the cash). Higher insurance premiums, although annoying, become less of an issue. Apartments, hotels, and rental cars would all lose a significant customer base unless they make it easier for those without credit cards to get their service. Home loans would have to go back to  manual underwriting.

Sure it might be idealistic and a bit of a pipe dream, but this is how capitalism works. And so far, we have been telling these companies we want it to work with the credit bureaus we have today.

Freeze Your Credit

Even if you still have debt, and even if you still want obtain more credit sometime in the future, freeze your credit!  It is one of the great ways to protect against identity theft. Do not buy the monitoring that credit bureaus provide, it only increases their pocket books and provides sub par and reactive protection.  You can get your free credit report, one from each bureau, every year from AnnualCreditReport.com. You can have coverage every 4 months if you spread out your credit reports.

Credit freezes can cost around $10 depending on your state. If you have been a fraud victim you can get a security freeze for free. TransUnion’s initial credit freeze is free, whether you have been a victim of identity theft or not. When you are looking to get credit in the future after you have frozen your file, you will need to “thaw” it permanently or get a temporary lift of the freeze. This usually costs $5 or $10.  Here are links to the three bureaus and their security freeze:

Experian (http://www.experian.com/consumer/security_freeze.html)
Equifax (https://www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp)
TransUnion (https://annualcreditreport.transunion.com/fa/securityFreeze/landing)

If you are still concerned about identity theft after freezing your reports, you can then consider buying identity theft insurance which will help resolve the issue and reimburse for losses that are not covered elsewhere.

Conclusion

There has been some good legislation that has come about regarding credit bureaus, especially from states that required bureaus to provide freezes and consumer protections. However I still cannot help the feeling that even that legislation might not have been necessary if we were more in control of our money and eliminating debt.  Government some times gets it right, like the security freeze laws (though I am sure some disagree), but often government goes to far. So, let’s not wait on legislation and the government. Let’s continue to vote with our money on the products and services we want, preferably with cash