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Send Me My Credit Score, Give Me Credit and Watch Me Crash!

by:
Alan McQuarrie

Do you know your IQ? Have you ever wondered how it compares with your wife’s? Is your IQ higher than your neighbour’s? Your boss? Why don’t we carry our intelligence quotient around with us...maybe on a t-shirt? Why would you drive a Mercedes or BMW to show your status when you can wear a baseball hat with your IQ? The reality is, regardless of your IQ level, it is not a true measure of your value as a person. Neither is driving a Mercedes. The same goes for your credit score.

A new brand of Fintech companies is offering to send you your credit score for free. The same companies are offering you credit in fast convenient online formats at interest rates that are lower than the payday loan companies. While everyone loves convenience, for most of us, convenience and credit do not make a good mix.

Unfortunately, many of us base our self worth and our sense of competency on our financial situation. While a credit score takes into account your payment history, it does not tell the full story of your student debt, loss of a job or other factors that have influenced your use of credit. There is a difference between your credit score and your credit rating.

Responsible use of credit is essential to support innovation, visions and dreams.

Checking your credit score is like checking your weight. Some people step on the bathroom scale every day. Like your weight, you don’t need to check your credit score all the time. It takes time to improve your credit score. But imagine a company that provided a free bathroom scale and then delivered offers of ice cream to your email every week. Doesn’t that seem a little odd? Then why would you sign up with a fintech company to get your free credit score knowing that they will solicit you for loans?

...you may end up with one more payment and a lower score down the road.

Responsible use of credit is essential to support innovation, visions and dreams. It allows us to own a home, start a business and establish ourselves in life. But in an environment of chronically low interest rates, escalating home prices and slow growth of income, the one things growing fast are debt problems. For every dollar of income today, Canadians have $1.68 in debt. In the last quarter alone, debt levels rose four times faster than disposable income. Fintech innovation that facilitates the increase of consumer debt is like adding two lanes to a six lane highway that ends at the edge of a cliff. Technological innovation has greatly improved access to an exploding proliferation of online consumer sites. No need to don your boots, coat and fight the traffic to the mall. Shop from your armchair! And now you can borrow and shop and never leave your home.

Be wary of anyone offering something for free. The chances are, you may get a free credit score but in the process, you may end up with one more payment and a lower score down the road. It’s like an ice cream truck pulling into my driveway and delivering a heaping bowl of pralines and cream between every meal. I just don’t need it, and frankly, it’s not good for me.

 

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