Money Mondays

The game getting foul, so here’s a free throw
Kanye West (Big Brother)

If I were to ask you if you preferred living free as opposed to being captive to someone else’s dream, most people would choose freedom. However, most of us live out a different existence. What I have found is that we voluntarily sign up for bondage in the name of gaining “good credit”.

Good credit is a trap. Why do I say that? Well, for obvious reasons. The primary reason being that in order to get good credit you have to subject yourself to being a financial hostage. If you take the road of never buying on time, you won’t get labeled as having perfect credit, you, my friend, will have no credit. If you do buy on time, but don’t dig your hole deep enough or stay in it long enough, you get penalized for not playing the game properly. So, in essence, you get trapped by the confines of the game.

I’ve heard comedians joke that when an African American marries a Caucasian the African American’s credit score goes up. It’s a pretty funny joke when it’s told correctly and there is actually some truth to it. Not because of race per se, but because by in large Caucasians have had access when African American’s were limited. Because of greater job opportunities and job security Caucasians adopted the “American Dream” philosophy at a level that outpaced most African Americans. Therefore, they were better suited to mirror the credit scoring models that were put in place. You see, if you don’t have the right mix of credit, it’s just as bad on your score as not having credit at all. Again it’s all a game. In order to have the BEST possible chance at having good credit you should have two installment loans (loans with a fixed number of payments), preferably a mortgage and an auto loan. Unfortunately paying rent doesn’t count toward your credit in the manner that a mortgage would, even if your apartment complex “reports your good credit”. You also should have three revolving lines of credit, preferably major credit cards and not retail store cards. If you are able to successfully manage these then you should have a pretty good credit rating. If you don’t fall into this scenario, don’t be alarmed, you can still have good credit, but you may end up subjecting yourself to other pit falls like too much credit and an improper balance of debt to equity.

So, what’s my point? I guess I’m trying to highlight two things. First, to even get in the game, you have to get in debt. Second, the game isn’t designed so that we all play on a level playing field. So, what you have to do is evaluate whether it’s worth it to you to even play at all, because if you do play you have to make sure you know the rules.

Some things you may not know about the game of credit:

35% of your score deals with punctuality of payment
30% of your score deals with amount of indebtedness or debt to equity.

Typically the first two knock middle and lower income individuals out of the game because they don’t have enough money to go around (living paycheck to paycheck) and if they have credit cards, they are maxing them out, especially in times like we are facing now.

15% of your score deals with length of credit history

Again, if you avoid playing the game for a while by using cash and have no accounts, then one day decide you want in, you are at a disadvantage. It’s like being a rookie on a team with several all stars, chances are you are going to have to ride the bench for a while and just enjoy practicing (paying on time). Keeping you in this game in this manner exposes you to risk.

10% of your score surrounds the type of credit you have on file.

If all you have on your credit is a loan for some furniture, a high interest car note, and your favorite department store, you are going to get penalized. In my opinion, this is a major area of discrimination, but I won’t pull out my Malcolm glasses today.

The final 10% of your score deals with how much you apply for credit.

In other words, you can be in the game, but don’t look like you are trying to load up the basket. If you do, you’ll be penalized.

So, as you can see, it’s a helluva trick bag they have us in. Unless you find a way to rise up to the levels of the wealthy, you pretty much have to play the game according to their rules.

Questions? Comments? Criticisms?

About the host:
Rich Fitzgerald is the author of the short story "One to Remember" featured in Love and Redemption (Bloggers' Delight Vol. 1), a collection of short stories by authors who blog. To read excerpts or to order a copy of the title, visit i-Lit. The book is also available on Amazon.

17 comments: said...

Excellent Post !!!

Rich said... thanks for coming by and commenting, do come back again.

Mizrepresent said...

This was so on point Rich, you broke it down beautifully.

Verbal Vixen (T Caldwell) said...

But this is a game that black folks most definitely need to learn to play.

If we don't, we will end up losing and wasting a LOT of money paying high interest credits, missing on out opportunities to own land, and we will keep ourselves lagging further and further behind other races in terms of financial success.

You do not have to be wealthy to play the game right. Just discliplined, informed and patient - three things that many of us are not when it comes to money. Auto loan, mortgage, paying bills on time, having 3 major credit cards with low revolving balances on them - all doable if you set your eyes on the goal. I accomplished these things in my mid twenties - perhaps we should write a book for my people detailing how.

EXCELLENT post and discussion, Rich.

Lovebabz said...


sista gp said...

I just closed on a house last week. The experience was phenomenally better with the banker than with the mortgage broker we dealt with when we were house-hunting a few years ago. The MB had us providing so much documentation since we were in a cash-only mode. Last fall, I got an auto loan, I guess that helped this time along with hubby's VA status.

Torrance Stephens bka All-Mi-T said...

preach - these the lessons we need to teach our kids, too bad we still got teach grown folks about this - great post folk

Rich said...

@verbal vixen - the wife and I are already working on a book of this kind.

@sistagp - congratulations - hope you got everything you wanted out of the deal.

CapCity said...

What Amerikkkan "game" DOES benefit Black people? Glad u posted this - cuz most of us are beating ourselves up for shyt that we don't control. The greatest Black skill: Creating a full & rich life despite the "set backs" & set UPS! ;-)

The True Urban Queen aka Sharon said...

I am with Torrance.
You have to start young.
I talk to my kids all the time about credit, being money wise, saving, and investing.
I believe as black people we tend to lack on financial education. So, learn all you can and please teach your children.

A New Man said...

Fantastic post, Rich! I love the fact that you're making the book idea for Black financial worth into a family project, too. How is life treating you in STL?

Lance said...

nice post rich. excellent analogies also.

Anonymous said...

wow - great post rich. this is awesome information! something interesting things to think about. this should be taught in schools!!!!

PrettyBlack said...

Loved it. It's unfortunate that some of us have to be taught so late in the game...but better late than never right?

It's also always better that when you do get your home, instantly (as soon as eligible) file for a home equity line of case anything happens it's better than a re-fi (higher mortgage payment) a second (two mortgage payments) or God forbid hitting your IRA or 401(k) or (b) whichever one you may have.

Good advice.

12kyle said...

PREACH!!! I don't have much to add to it. You hit the nail on the head.

Opinionated Diva said...

I don't think you have to be a "financial hostage" to have good credit. You just have to manage your money well...and that means using your credit but paying off the balance at the end of the month. Hard...but doable.

shine said...

nicely done. entertainment with substance