Credit and what (we think) you need to know about it.

Credit impacts almost every aspect of our financial lives. Of all the things in our life, we seem to know the least about credit. Understanding credit is extremely important. We’ve gathered what we think you should know on this page.

Our unbiased perspective.

Before you read further, we want to tell you why you should read further. 

Here at Credzu.com, we are uniquely positioned to tell you things in an unbiased manner. Because we are an independent third-party escrow company that sits between service providers and consumers, we have a unique perspective. We don’t have a dog in the fight and we can call it as we see it. Enjoy!

Defining and understanding credit.

Anyone can go to Google or some trusted financial website to find a definition of the word “credit.” Here’s what that might look like.

What might be more helpful is trying to understand credit, rather than accepting some potentially unrelatable definition.

For some reason, I vividly remember a story about credit in an international business book I read in college. It showed two people at a dinner table ordering food and the book explained that that, right there, was credit.

A person, the waiter or waitress, walked up to another person, and provided a service, uncompensated. The cooks began to take the order and eventually the food showed up at the table, uncompensated. It was done on the promise of the patrons to pay for all of the goods and services they received.

Come to think of it, that reminds me of J. Wellington Wimpy’s famous line: 

“I’ll gladly pay you Tuesday for a hamburger today”

That is precisely credit; a transaction that occurs using the promise of repayment as currency. 

So, if credit is so easy, why is it so complicated? Credit is everywhere; from a promise to pay back your friend, to utilities, to leasing or buying cars or properties, to opening credit cards, bank accounts, loans, to job applications. 

With that much entanglement in our lives, credit has become subject to rules, laws, regulations, and policies. And, because credit is everywhere, there’s a lot of points of failure where things can go wrong.

The drawbacks of our credit system.

Imperfections exist almost everywhere. Most imperfections we overlook because they don’t really impact our lives. In the case of credit, it’s much more difficult to overlook problems.

The credit industry is massive, complex, ever-changing, and susceptible to problems. 

When credit problems show up in our lives, we see them as an event that occurred just now. However, that thing that showed up in our life was years if not decades in the making.

There is serious consumer harm in the market of credit. It is natural for humans to conclude this is so because “people are bad.” And, that’s not an entirely crazy assumption. There are indeed bad actors in the industry. 

However, the larger problem with the industry is how large the industry is. 

Imperfections

Consumers

Pay bills

Big banks

Cozy relationship with government

Big bureaus

Ironically, big business runs to the same people that harmed consumers run to: the government. They want “consumer protection laws” that happen to protect them. 

I’m not going to go on a conspiratorial rant, here, but… ask yourself: Are my “rights” to sue a credit bureau under the Fair Credit Reporting Act actually procedural hurdles that make suing more difficult

Will the vast majority not even think about suing because you have the carrot of “dispute processes” dangling in your face? I think it’s both, for sure. However, I tend to believe consumers are probably better off in the imperfect dispute system because it’s a very inexpensive lawsuit / arbitration-like procedure that can actually benefit consumers. The downside is that it’s relatively complicated, resulting in the need for assistance. 

Credit score modelers

Credit repair

Fraud

Foriegn and domestic 

Government

Consumer protection laws

Social security administration (SNNs, EINs, etc)

Benefits of our credit system.

Instant decisions.

Focus on consumer protection.

Can’t be harassed (FDCPA)

Consequences for ripoffs (CROA, FTCA)

Anti fraud protections.

Companies AML/BSA policies

Credit freeze and fraud alerts

Fraud prevention (even if at the expense of consumer harm elsewhere)

Ultimately.

Ultimately, we should be grateful, but prepared to deal with problems.

It’s big, bloated, and will likely cause problems in your life. 

You likely don’t have time to read consumer protection laws, the funds to sue billion dollar corporations like the credit bureaus, etc. However, the system, as messed up as it is, works. The way we benefit from it is being prepared to deal with the inevitable problems and for the sake of sanity, have perspective and realize that we have a good imperfect system.