Credit Scoring is a Scam and a Fraud

I was just sitting here and noticed that someone searched for “credit scoring is a scam and a fraud.” Kind of an interesting search. Frankly I never thought of it like that.

But that reality is that point of view isn’t all that far off. You see the impression people have about a credit score isn’t so much a fraud and much as it it just wrong.

Your credit score is not an indication of how well you do at managing your money. In fact your credit score has little to do with you and everything to do with your creditors.

The credit scoring models were developed to allow creditors to mass screen people for credit offers and to minimize risk in lending. They are not a grade or mark about personal finance excellence.

As an example, a person that avoids debt and does not take out credit has no score at all. Yet they seem to be conducting their financial affairs with the utmost of prudence.

But a credit score isn’t worthless. A good credit score gives people access to credit when they need it or want it at the lowest rates. Since the credit score is indicating the person is a low risk of defaulting, lenders want to get that person to buy their loan product and attract them with cheap interest rates or access to their product.

People that have had a bad credit bump in the road or ongoing financial difficulties will have a low credit score. The score is a warning to creditors to either stay away and say no or to increase their price of credit through the interest rate to cover projected defaults.

When deciding how to deal with issues in life, and especially financial issues, falling a slave to your credit score is a bad idea. I’ve watched so many people make really bad decision because they are afraid it will hurt their credit score. At times like that the more appropriate answer should be “Who cares about the credit score.”

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A credit score is actually not a scam, sham or fraud. But it is a game.

Why is it a game? Well it’s an easy system to deal with and overcome. A bad credit score isn’t a death sentence and it can be easily overcome. Look at how easy it is to play the game.

So let’s get it straight what a credit score really is and play the game well. If you have to take a credit hit, so be it, but then get back in the game and clean things up.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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16 thoughts on “Credit Scoring is a Scam and a Fraud”

    • Yes I believe this is true! I struggled in the past financially but have for over a year and a half paid my bills on time and drastically reduced my debt but my scores didn’t change – or dropped!

      • To increase your scores, you need to remain in the credit game. How many open credit cards do you currently have that are paid on time? A mistake I see many people make is not to continue to use credit cards and instead use a debit card, which is not smart.

        • First, it’s not a GAME when these institutions affect people’s ability to live, not-to-mention mostly the non-wealthy and even more so the poorer demographics.

          And to imply that it is OK for these institutions to BLACKMAIL people into having to continue to use credit to maintain a score is pure BS. Credit Scores are a SCAM. PERIOD.

  1. worked hard got my score up to 740. applied for two credit cards bought some furniture and guess what ? my score dropped to the low 600 s. dont get caught in the scheme ! now it will take several months to get back to 740. i pay my cards early lots more than the amount that is shown to pay for the month, but because I exceeded what their formula says for debt ratio I am being made to look like a low life!

    • Yes, many get confused that a FICO or credit score is an indication of personal finance success. It is a calculated score to help creditors determine who will be lowest risk and highest profit.

      • Poorly calculated… It should be illegal for anyone other than your financial institution to pull your credit and even they should need your written consent for each inquiry. This notion that you need a good credit score to get a job, rent an apartment, or get insurance is ludicrous. Clearly this system was designed by loan sharks to keep people in debt.

        • Absolutely it is. They send you offers and if you accept the offer, BAM! Your score is hit. I watch my credit score go up then plumet down because I used $200 of $2,000-20,000 credit line. If you close an account you don’t use, BAM score drop. It’s STUPID. It’s absolutely BS. If you don’t have enough credit lines, it will keep your score down. Then you need a MUX of different types, ie loans, resolving, etc. So basically they want to set you up to get into debt the punish you if you use it. Then if you default their insurance pays them. So we are pawns and yes this system IS FRAUD. It doesn’t reward staying out if debt.

          • Don’t forget a creditor can randomly choose to reduce your credit line thus affecting your overall line of credit, thus raising you credit utilization. I’ve had this happen on a card that I was never late on and paid off nearly monthly, they reduced it from $2,000 to $200. Pretty sure it was a punishment for nut remaining in debt with them.

            Credit Scores are 100% a Scam, when you play with my ability to live on some obscure score it’s not a game.

            And when is it ok for Credit Bureau to start advertising credit cards to people? It’s a huge conflict of interest and just another indication of a scam against consumers.

  2. I’ve actually found credit scoring to be very helpful.  Having been through the ringer financially I can tell you that there is no more diligent person than myself with their finances.  It’s a matter of trial and error.  Just pay bills on time and pray that your life stays afloat.  That’s the only advice I can give anyone.

    • But it still doesn’t make a huge different of you pay your bills on time (which I do). I worked hard to get my score up. It was just about 720 when I did a refinance on my house. I have never been late on a mortgage or car payment in my life. The minute my refinance hit my credit, my score dropped 23 points! Just for qualifying and using said credit for a house. The way credit scores are figured IS a scam and not meant to favor anyone who actually uses their credit, even properly, unless they are earthly. Not for the average person.

      • Credit scores are for the benefit of creditors ONLY. It is not a number that says if you are smart with money or good at personal finance. It’s just a risk number for lenders to maximize profit. Unfortunately, that’s not really the way it is explained to people.


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