Explained: Lowering Your Credit Score is Easy, Building Credit is Hard

The credit system in the United States is broken.

Okay, that sounds a little hyperbolic so I'll walk it back a step - the credit system is weighted against you so that it is easier to fail than it is to succeed. There is a pervasive imbalance between positive and negative incentives which leaves the average person severely disadvantaged, and it is causing real harm.

It is not hyperbole to state that the credit system is objectively unfair in its current state, and is ill-equipped to provide an objective and accurate record of a person's financial commitments.

Transunion, Equifax and Experian - the three pillars of the U.S credit system, or as I like to call them: The Three Masters of your economic future.

Every job you've had, every lease you've ever signed, ever residence you've ever lived at - they know it.

Every loan you've received, every payment you missed, every rent check that was late - they know it.

They even know when you've missed payments to your phone provider, your energy retailer, your water company (granted the fact that these companies report missed payments, which they have been known to do).

These 3 private bureaus understand you better than you probably understand yourself.

Or is it that they understand only a cropped version of the full picture?

Why is it that a utility company can report a late/missing payment to the credit bureaus when you don't even have a line of credit with them? I didn't take a loan out from the Gas company, why is it that they can damage my credit score, and jeopardize my future borrowing potential?

It could even effect where I can live, or what jobs I can have. (Eg, police often reject candidates with low credit scores)

Shouldn't it make sense that, if I owe the Gas company, or my land lord money - that they should deny me the service they were rendering and seek compensation either privately or publically through the courts?

This punishment (let's be honest, that's what it is) of "negative reporting" does not make sense in regard to services, it serves no real purpose other than punishment, and as I have explained, the effects of such punishment are severe and can last a disproportionate amount of time.

You fall behind on 2 months of electricity bills, yet it gets used against you for up to 7 years?

This seems like an extreme and destructive approach to policing the economic habits of individuals. Short term mistakes balloon into ambition crippling obstacles, kneecapping your future potential.

Dreams die in under 500pt credit scores, and it's a long... long way back. The climb upwards takes 10x the effort.

What makes it so easy for your credit score to plummet is that a negative report can come from any source, and they are accumulative and remain on your record for the better part of a decade, and to top it off they are almost impossible to remove.

So what makes it hard for you to build credit? Why is a negative report so hard to mitigate? Simple. The total lack of positive reporting.

Companies that are quick to negatively report delinquency NEVER report on time payments. In fact, the only institutions that do report positively are companies legally obligated to do so. If you have a loan with Bank of America, they MUST report on-time payments as well as delinquent ones.

Let me ask you this: When was the last time AT&T reported to Equifax that you made your monthly payment on time?

$100 says NEVER. They have NEVER positively reported your payments, and because they haven't, proof of your honored commitment will never be present on your credit report.

If you applied for a loan, a bank would see that you missed 3 phone bill payments, but they will not see the 30 on-time payments or the 6 early payments you've made, and their decision will be not include these positive objective variables.

They won't see that you've never missed a rent payment, or that you've never missed a Netflix subscription, or whatever. The negative incentives are not counterbalanced by equal positive incentives.

Because of that, your application is less likely to be accepted.

Because of that, anyone who views your credit history is only seeing an ugly skewed version of reality.

• On the topic of positive incentives.

Do you think you would be more willing to pay your utility bills if utility companies reported your on-time payments to the Three Masters?
Do you think that people would be more willing to settle accounts in collections if those debt collectors reported positively when you pay?

If your credit report included EVERYTHING you've done with your money, would your score really be as low as it is?

I doubt it.

And lastly: Why don't companies that you use report positively, yet they WILL report negatively? Here's the kicker. The bureaus charge a fee per report. It costs a business time and money, and reporting on-time payments just isn't cost effective for anyone - so it doesn't happen.

If reporting fees didn't exist and companies were rewarded and lauded for positive reporting, we would see far more higher scores, and far more economic freedom in this country.

Thanks for reading, this was my first blog entry - please let me know if you would like me to write more blogs like this.

If you enjoyed it please leave feedback, and I'd love to read your comments.

Thanks again.