We have a buying problem. Our buying has given us a credit problem.  And our credit problem has made us slaves to the credit market.  Many Americans use their credit scores as a way to evaluate and judge their financial success in life. Through decades of marketing, product innovation, and the passing of personal finance myths from one consumer generation to the next, America’s financial services industry has most of us conditioned to focus our attention on improving the credit scores computed and maintained for each of us by America’s four major credit bureaus, Experian, Equifax, Innovis, and Transunion. Such effective conditioning comes as no surprise – it is, after all, the financial services industry that profits handsomely from us taking out mortgages, using credit cards, obtaining car loans, and otherwise borrowing money for just about anything we want to buy or do to enhance our lifestyles.

Your credit score helps someone, and its not you

Alas, the more we consumers borrow cash from the financial services industry, the wealthier the industry becomes and the poorer we become. This can readily be seen in the simplest definition of your wealth, which is determined by your net worth:

Net Worth = What You Own – What You Owe

The more you borrow from the financial services industry, the more debts you owe. The more you owe, the lower your net worth sinks toward zero, or even into negative territory. The financial services industry has a net worth too. But, what is true for your net worth is exactly the opposite for the financial services industry’s net worth – the loan you must repay to the industry is an asset the industry owns. The more the industry lends cash to you and other consumers, the more assets the industry owns. The more the industry owns, the higher the industry’s net worth rises.

Look at the recent VISA IPO.  Just have a look at it.  In a struggling market Visa is not only surviving but thriving.

From the financial services industry’s perspective, your focus on your credit score is a great thing. Your behavior helps the industry grow wealthier over time. The financial services industry has it good – the product it sells is cash, the price of its product is a given interest rate, the interest payments we make are the industry’s revenues, and thanks to the industry’s unique ability to scale by simply recycling our interest payments into still more revenue-generating product, the industry’s profits are hefty. The industry has made the rules of the game, and the ball used to “win” in that game is your credit score. So, as conditioned, you focus on the ball, trying to move it up the field toward the goal. But, clearly, your behavior – your focus on your credit score – is not such a great thing for you and your family’s wealth. While having ready access to cheap credit can be a good situation in which to be, obsessing about your credit score so that you can borrow more and more from the financial services industry could ultimately preclude you and your family from achieving true financial freedom and security in your lifetime.

I submit to you that you and your family don’t have to play the financial service industry’s game. You have a choice. You can change the game. You can freely elect to change your behavior. You can remove your focus on your credit score and, instead, focus your attention and effort on building net worth.  Get rid of what you owe, and add to what you own/save.  Its so simply, yet it will be your saving grace in the end, I promise.

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