In certain circles there has always been plenty of discussion of credit reports and scores. But since the Great Recession, interest in the topic has grown to the verge of mainstream consciousness. Ordinary folks now routinely consider the
credit score impact of their actions, including such esoteric issues as the undesirability of closing unused credit card accounts. (It increases the ratio of used to available credit, which is bad.)
But through all this it seems as if the underlying point of credit scores has been lost. It is not a game with arbitrary rules meant to keep consumers on their toes. Nor is it a measure of virtue.
If you are in the business of lending money, what you want to know about a potential borrower boils down to a simple question: will this person pay me back? Credit scores do nothing more than give a probability that a borrower will make good, based primarily on his history of paying other people back, but also considering such measures of financial stress as how many times he has asked for a loan recently and the credit lines to credit used ratio mentioned above.
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As readers of this blog know, I consider the smoke-to-fire ratio on ID theft to be heavily skewed to smoke. ID theft does occasionally cost consumers real 
money and cause real headaches, but those occasions are orders of magnitude rarer than popular wisdom would lead you to believe.
The basic truth about ID theft is that it is a form of fraud in which the consumer almost always plays the role innocent bystander rather than victim. Sure, sometimes innocent bystanders get hurt, but the basic idea of ID theft is to trick a financial institution into handing over some cash. Why steal from a consumer when you can steal from a bank? As a great philosopher once said “that’s where the money is.”
One of the reasons that this basic truth is routinely obscured is that perpetuating the Great ID Theft Scare is just so convenient for so many people. The snake oil salesmen at LifeLock and it’s competitors are leading examples, but there are others. Journalists in search of an easy story to write are another.
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This is the third installment in what has turned out to be a series of posts about the CARD Act of 2009 and the Federal Reserve’s new regulations to implement same. Last week I discussed how new rules requiring lenders to 
consider ability to pay were a non-event. And on Monday I explained that there were not, after all, meaningful restrictions against giving cards to those under 21.
Today I will round up some other don’t-know-if-I-should-laugh-or-cry oddities that I came across in my few hours of research. As good a place to start as any is the other prong in the attack on underage plastic, new draconian restrictions against marketing these evil things to college students.
Section 304 of the CARD Act reads, in part:
No card issuer or creditor may offer to a student at an institution of higher education any tangible item to induce such student to apply for or participate in an open end consumer credit plan offered by such card issuer or creditor, if such offer is made—
(A) on the campus of an institution of higher education;
(B) near the campus of an institution of higher education,
as determined by rule of the Board; or
(C) at an event sponsored by or related to an institution
of higher education.
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In some ways, the CARD Act of 2009 was everything health care reform was not. It enjoyed broad bipartisan support, passing the House and Senate by 361-64 and 90-5 respectively. It dealt with topics familiar to most Americans in simple terms. And it was refreshingly short, at only 33 pages.
A person might think that would make it a model for other legislation, an example of how effective government can be if reasonable people cast aside their partisan differences and write simple rules to make our lives better.
Then again, maybe not.
The act packs quite a few provisions into its 33 pages. Many of those may turn out to work just as expected. But an examination of what I consider to be one of the more ill-conceived provisions, the ban on issuing credit cards to those under 21 years of age, reveals a yawning gap between what we thought the law would do and what it really does.
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Most of the Credit CARD Act of 2009, that well crafted and thoroughly thought through law that will fix all that is wrong about credit cards and allow us to carry guns in National Parks, comes into effect on February 22nd. So it’s time for bloggers like me to revisit the act, particularly some of the less widely 
discussed provisions, and tell our readers all about the big changes on the way.
Wallet Pop beat me to it last week with a post Lenders plan to guess your income from credit report. It was about how the CARD Act "requires lenders to consider your ability to pay any new or additional debt before approving a credit card application." Apparently, that means verifying income, which puts a damper on those really annoying pitches you get to open a store-branded card whenever you try to buy something.
"Retail stores are quite upset about this change in the instant approval of their cards," Bill Hardekopf, CEO of LowCards.com, wrote to WalletPop by e-mail. "Consumers now need to show proof of income when they apply for a card, and not many of us carry this around when we are shopping in the mall."
This made me, briefly, optimistic that the CARD Act would improve my life after all. I hate it when the salesgirl extends the time it takes to check out by asking me if I’d like to save 10% and open a new account. That’s three seconds of my life I can never get back. The only thing worse is when she asks the guy in front of me on line and he says yes.
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credit score impact of their actions, including such esoteric issues as the undesirability of closing unused credit card accounts. (It increases the ratio of used to available credit, which is bad.)
Credit Cards, Media, PF Blogs | Frank Curmudgeon | 
July 13, 2010 11:59 am | 
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