THE GREAT AMERICAN CREDIT SCORE GAME: PAY TO PLAY, BORROW TO LIVE

Look, there are few inventions in the history of American capitalism more brilliantly diabolical than the three-digit number that dictates whether you are allowed to buy a house or merely rent a cardboard box under a bridge.

It is called your credit score, and it is a masterpiece of financial circular logic.

If you want to buy a car, buy a house, or occasionally get hired for a job that involves looking at a spreadsheet, you need a good credit score. How do you get a good credit score? By taking out loans and buying things you can’t afford with money you don’t have and then paying interest to people who already have too much money.

If you are a sensible, prudent human being who pays for everything in cash, saves your earnings in a jar behind the water heater, and refuses to owe a dime to any man or bank, the financial system does not reward your virtue. It looks at you with deep suspicion, brands you a ghost, and assigns you a credit score roughly equivalent to that of a fugitive international art thief.

The message is clear: To be trusted with money, you must constantly be in debt.

A Brief History of the Machine

It wasn't always this way. Once upon a time, getting a loan involved walking into a mahogany-paneled bank, shaking hands with a local banker named Arthur who knew your father, and convincing him you weren't the sort of fellow who would blow the mortgage on horse races and cheap gin. It was subjective, occasionally discriminatory, and utterly inefficient.

Enter Bill Fair and Earl Isaac.

In 1956, an engineer and a mathematician founded the Fair, Isaac and Company—later shortened to FICO. They decided that human character could be reduced to a math problem. By 1989, FICO introduced the standardized, three-digit credit scoring system. In 1995, mortgage giants Fannie Mae and Freddie Mac mandated FICO scores for evaluating home loans. Suddenly, the algorithm was the law.

The system converted the ancient moral question of “Is this person trustworthy?” into “How effectively can we extract 24% APR from this individual without them going entirely belly-up?”

What followed was the greatest explosion of consumer borrowing in human history.

• 1989: Total U.S. household debt hovered around $3.2 trillion.

• Today: Total American household debt sits at a staggering $18.8 trillion.

We didn't just adopt credit scores; we built an entire $18 trillion economy on the principle that every citizen should be leased back their own life on monthly installments.

The Rules of the Racket

The genius of the score is that it isn't actually designed to measure your financial health. If it were, having zero debt and six months of living expenses in the bank would give you a perfect 850.

Instead, it measures your profitability to lenders.

Consider the "Credit Utilization Ratio." If you have a credit card with a $10,000 limit, the algorithm wants you to use some of it, but not too much of it. Use 10%? Good boy. Use 80%? Panic. Use 0%? You aren't playing the game, and the machine gets bored.

Or consider what happens when you pay off your auto loan early. You celebrate! You broke the chains of interest! You own the sedan outright! You check your credit score the next morning, expecting a digital pat on the back, only to find it has plummeted fifteen points. Why? Because you closed an active credit line. You killed a stream of recurring interest income for a bank. You monster.

You Can't Opt Out

If this were merely a game for people who wanted to lease brand-new German sports cars every two years, it wouldn't be a racket—it would just be entertainment.

The trap is that the score has metastasized into everyday civic existence:

• Housing: Try renting an apartment with "no credit history." Landlords view a lack of debt the same way a police officer views someone driving 15 mph under the speed limit with both hands rigidly at 10 and 2—obviously hiding something.

• Insurance: Car insurance companies in most states use credit scores to set your premiums. Apparently, if you missed a payment on a department store card in 2022, you are statistically more likely to back into a mailbox in 2026.

• Employment: Employers run credit checks to see if you are "responsible," creating a delightful Catch-22: you can't get a job because your credit is bad, and your credit is bad because you can't get a job.

The Moral of the Algorithm

The American credit rating system is a casino where the house doesn't just win—the house mandates that you sit at the blackjack table just to buy groceries.

It has successfully convinced three generations of Americans that wealth isn't what you have, but what you are allowed to borrow. We carry around our 720s and 780s like badges of honor, proudly displaying our gold-star ratings in the grand exercise of owing money to people who sit in tall buildings.

It’s a brilliant system. Just make sure you pay your balance on the 15th, don't close that card you opened in college, and whatever you do, don't pay off your debt too fast. You wouldn't want to look irresponsible.

**This is an excerpt from my latest book, "Don’t Do What I Did (Except the Fun Parts): Notes to my grandsons on how to navigate life, women, money, politics, and other natural disasters."

Link in the comments.

See less