The Game of Credit

It’s not a fair game in the least.

Our current credit system is a great system for some consumers but not for others. FICO even has a FICO Resilience Index outlining which consumers are considered to be more financially resilient. As with Credit scores, consumers with the highest scores most likely don’t need credit but are constantly getting inundated with offers; while those with the lowest scores need credit but rarely get any offers. It’s a bit of an oxymoron how it works out like that but that is typically how things go in the game of credit. Lenders want to give money to the best credit candidates. The best credit candidates typically don’t want or need the money. The borrowers that actually need the money don’t have a good enough credit score to qualify for what they want. Everything is reversed from how it should be.

In a perfect world, those that need the credit would get it and those that borrow money would always pay it back. However, we don’t live in a perfect world and our system for borrowing and lending is far from perfect.

How Does it Work?

The bad credit borrowers end up getting underserved loan options and the good credit borrowers end up getting over-served options.

The game of credit is not always a fair one but it’s the system we have to work with. If we can understand it to the best of our ability we can try to adapt and so that it can benefit us! In that system it's important to understand the difference between good debt vs bad debt.

What’s a Good Credit Borrower?

A good credit borrower is anyone with a credit score above 670 (or the required criteria for a given loan or financial product) and an acceptable DTI within the range for required borrowing.

What’s a Bad Credit Borrower?

A bad credit borrower is anyone with a a bad credit score. This means that their score is usually below the required criteria for a given loan or financial product and who's DTI does not meet the criteria for a given loan or financial product.

How Much Does a Debt to Income Ratio Weigh into Lending Qualifications?

Debt to income ratio is very important when it comes to credit worthiness and actually being able to qualify for lending products. You can have the best credit score in the world but if you don’t have the available money to afford a mortgage and the debt to income to bat it won’t help you much.

Credit is important in this respect if you plan on getting a mortgage but it doesn’t mean you should focus solely on that because there are other qualifications that go into these considerations. You will typically need to provide proof of income and other information like paystubs. It could also be to your benefit to provide verification of liquid assets for extra consideration. These extra considerations will only help bolster and boost your application, demonstrating to the lender that you are in fact a good credit candidate.

Credit can be finicky at times. It's good for some and not so good for others but if we understand the system we can use it to our benefit to try and help us achieve our goals in respects to borrowing.