It would be nice for consumers if they could be the ones to design the credit scoring system. Currently the credit industry looks at the circumstance that consumers face – how much debt, type of job, savings, and other financial events. Most consumers would prefer that lenders look to the heart of the situation instead.
Job Stability
A person that has held the same job for several years should be a better risk than someone who has hopped around from job to job. Sticking with the same line of employment shows reliability that should be considered when it comes to giving someone money that will have to be paid back in a regular and timely manner.
Service
Military, civic, or public service is another sign of reliability. Many of these positions are also sounder than other occupations in the market place. Consumers that hold a spot in these situations have shown an interest in the common good with is an indicator of strong character. Strong characters are typically good credit risks because they will pay back what they borrow.
Early Payments
Creditors may not make as much money when a consumer pays off a debt early but they do still make a profit. Early payment also shows that a consumer is responsible with funds – so much so that they are able to build up enough savings to pay off debts ahead of schedule.
Repayment of Bad Debts
It shows strong resolve when a person recovers from a financial struggle and then goes back to the debts (which may have been written off as bad) to pay what was originally owed. This should show that a consumer is a good risk because the debt will be paid.
Paying Taxes
Not paying taxes is a big mark in the negative column. Those consumers that do pay taxes and pay them in a timely manner should get some positive marks for their efforts.
Partial Payments
People face tough times and sometimes those times will cause financial problems that are beyond control. Consumers in trouble often opt to pay partial payments as a measure of good will towards creditors. In the system created by the consumers this would even out the late payments or at least reduce the effect of those negative payments.
Working it Out
Some credit should be given to those individuals that attempt to work out financial problems with creditors. It is easier to ignore the problem than it is to face it and attempt to deal with it.
Explanations
There are circumstances that can be beyond the control of the consumer. Getting into an accident that causes financial problems, natural disasters, or many other situations could easily explain the inability to make payments or even contact with the credit companies regarding the payments. Although currently there is a way to include credit statements in a credit history those statements are given little – if any – consideration.
The credit industry would likely be a different place if consumers were allowed to create the rules. Most consumers would prefer to give more value to the good deeds and good character traits and less weight to the negative aspects of a financial history. The changes might be good and some of it would be better, but some of it would still end up making people unhappy. The truth is that it is impossible to please everyone.
Creating the perfect credit review system is an impossible task. But it still might be a valuable lesson for lenders to look at more than mere circumstances. Often the measure of a man is far more than a simple mathematic equation can weigh.
Next: Credit Crisis