The headlines are full of stories about how banks, mortgage lenders, and businesses have tightened their so-called ‘lending standards’. Did your bank just lower your credit limit without explanation? Did American Express offer to buy you out if you’d just give up your card?
Though the media will tell you that these tactics serve to isolate financial institutions from risk—banks themselves may have the chutzpah to tell you that they’re really protecting you from overextension—this is all a LOAD OF BULLSHIT!
What happens when Wells Fargo terminates a credit-card that you’ve carried for years or when CitiBank cuts your credit-limit in half despite your spotless payment record? Well…your ‘debt to credit’ ration goes up and with it…YOUR CREDIT SCORE GOES DOWN! And therein is the key: America’s financial institutions are engaging in a concerted effort to lower the overall credit scores for millions of otherwise credit-worthy Americans. And why? To reap more profits in the form of higher interest rates. Consider: If your mortgage lender can just figure out a way to lower your credit score form the low 700′s to the high 600′s you’ll be forced to pay 10′s, maybe 100′s of thousands of extra dollars on a higher interest rate refinance.
In short, credit score destruction is bad for Americans but great for the financial institutions that, with the federal government’s help, have been f*cking us for the last 18 months.