Friday, July 29, 2005
Get Up, Stand Up...
...stand up for your right.
Get Up, Stand Up,
don't give up the fight
Thanks, Bob.
Holy crap what a long day yesterday.
I was using a nail gun to keep my eyes open by the end of it, and the evil trolls of Increased Productivity seemed to have somehow found a way to tap extra work hours into a 24-hour day with their tiny, terrible troll-hammers.
But the second-to-last thing I did last night was go to community group meeting. A public hearing.
I love community meetings.
Doesn't matter what the topic is, the breakdown is always the same.
Experts with blueprints who tell you more than you’ll every want to know about whatever to subject might be.
Wanna know about berms, or beetles or the regs governing the signage, sidewalk-access and smoking restrictions at bistros? Go and ask.
Then there are the ramblers: the guys who do all 18 minutes of their own, personal Alice's Restaurant.
Then the business guys. Suited up and on the prowl for government sugar...and want to also be sure to tell the government to fuck off if anything that's being planned might bump up against their bottom line.
The ranters. Always amusing.
The fat guy with a sheaf of grubby paper who takes an hour to make it to the mike while the temperature seems to rise one degree every minute. Then he gets to the mike and rants about whatever the fuck happens to be romping through his mind at the moment.
Proving definitively that humans don't possess telepathic or telekinetic powers because if we did, Horton would have heard all us Whos’ mentally shouting, "Shut up. Shut Up. Please, Holy Mother of God, it's 170 degrees in here and why won't this asshole Shut The Fuck Up!"
Also his head didn't explode.
The Community Activists, for whom every forum is a Nail for their particular Hammer.
You always see it coming.
There's a few moments of frosting where they talk a little -- very little -- about the reason the meeting was called in the first place...then on to the Bitch List.
Don’t misunderstand, it’s often a valid Bitch List – or at least portions are – but every meeting is an occasion for telling whomever is gaveling the session that the neighborhoods are getting screwed. Whatever’s on the flyers – a dog park, a bond issue, bike trails or mosquito abatement – you’re going to hear 30 seconds of symbolic abatement chatter, and the rest is how they’re getting screwed in various ways by the allocation of government money, or gentrification, or The Man generally.
Then somebody rises to tell us that his cousin was arrested on totally trumped up charged. Didn't have anything else to say; just setting the record straight on that particular matter, in case we were interested.
Then there's the fragile, old woman that also take a long while to make it to the microphone, and then tells a story that breaks your heart. I remember one such woman who began her remarks at a large hearing with the Mayor present, "Your honor, your father and mine were both Sons of the City..."
Brought the fucking house down.
And for anybody who thinks that the Left is secular, Jebus-hatin’ monolith of queers and abortionists, you will hear more “Tell it!"’s at a community meeting and exactly as many “Amen”’s as you’re likely to hear in church on any given Sunday.
And I wouldn’t have any of it any other way.
It’s raw, pure, unstepped-on democracy, which is why I love it. It draws the committed and the “should be committed” both, and if you’re not used to them, committed people can make non-political, I-don’t-wanna-get-involved, day-to-day muggles feel very uncomfortable.
"Cause" people: They don't blink much, and you're either useful to them, an impediment, or furniture.
If you’re a community leader or activist, you know everybody on your block and in your area. The Alderman knows you by your first name, and maybe to Mayor does too. Most likely you’re in the pew every Sunday because you grew up “church” and that’s where you got your mission and your vision of public service and activism: it’s the pivot around which action often turns.
These kinds of meeting are a singular opportunity; your chance to make your government listen to you. You can hold the floor and make them pay attention to you.
Then you can come back in a few weeks and make them listen again.
Government goes where the people push it, and absent the constant pressure (translation: bitching) any government will wander off into the weeds and start fucking with you and telling you what to do.
But your rights and freedoms don’t come from them; their freedom of motion comes from you. Its hard fucking work, and Big Money talks, but at the end of the day (sometimes a very long day) the government moves where we will it to move.
See the guy in the Rockwell painting of the “Freedom of Speech” above?
He’s nervous. Really nervous.
By his tan and his hands and his clothes, you can tell he’s a working man. Everyone around him is wearing a tie; his collar is open.
Those are his remarks there in his pocket, which he probably spent a long time writing out, tossing out, and then rewriting.
He probably told his family that tonight he’s gonna go down to the meetin’ and give those Big Guys what ‘fer.
His wife was probably very proud of her man; he can swing an ax or drive a dozer, but he’s never been too good with words. Maybe she helped him with his remarks; maybe he didn’t want his woman to see him struggling with something that he has trouble mastering.
His kids are bustin’ out loud proud of him. He’s been talking about what degenerate asswipes the politicians are for years (of course, he reserves the “degenerate asswipe” talk for the tool shed, or maybe the bar.) Now he’s really going to march down there and kick a little ass around.
Way to go Pop!
But now he’s there, in his laborer’s clothes, and all his neighbors are looking at him, and his wife and kids and the warm comfort of his home are across town.
He stands.
He grabs the pew in front of him for dear life; sinks his nails into the wood.
It’s something solid. Something real. He perhaps gains strength from hanging on to something hewn and boned and made straight and true by honest hands. This is something he understands in his skin.
This, and that come what may, he’s a goddamned American Citizen, and has every right in the world to be there, to stand, and to be heard.
When did we forget that?
His remarks – toiled and sweated over as much as anything he’s done at any job site – stay rolled up in his pocket.
He doesn’t need them.
All he has to do is plant his feet, stand straight, tell the truth like he sees it, and speak from his heart.
At the end of the day, that’s all any of us are called to do, but we must do it. Even if yours is a quiet voice, or is falters, or you don’t have all the just-right words laying around at your finger tips to make your points perfectly and in perfect, pear-shape tones...fuck that.
Just get up. Stand up.
Stand up and speak your mind.
And don't give up the fight.
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94 comments:
damnit drift -- now you've gone and made me cry. right before work, too. now i've got to go in, all runny-nosed and red-eyed and try to explain how some pasty nerd on the internets got my heart all fluttery and my courage all up with a description of a painting. a painting of some blue collar ranter at a community meeting.
there goes that raise i was hoping for.
but it's worth it. thanks for reminding me why i don't actually want to leave this country for quieter climes.
thanks.
Damn, man, this actually made me feel a brief twinge of...well, patriotism. Very impressive post; were I less cynical, it might give me hope for this country.
All town hall meetings are alike and the one you described, Drifty, are exactly like the ones I've attended here in Massachusetts. This is the last true surviving relic of the kind of democracy that was midwifed here over 200 years ago and you can speak louder at town hall than you can, even, at a high school on election day because at a town hall meeting your vote has a voice and a face and cannot be ignored. On election day, your vote stands a good chance of being counted but that's about it.
There are many things that I despise about George Bush, obviously, but his bastardization of the Town Hall Meeting concept to push his shithouse-rat-on-fire-insane Social Security scheme is nothing more than one Amen session after another, where those in attendance are picked for their conservative loyalties and can always be counted upon to say "Hallelujah, brother!" and "Testify!" when Bush drones on and on about how putting our retirement funds in the hands of Wall Street stockbrokers who chide CostCo for being too benevolent and friendly toward its workers and customers and not greedy enough for its shareholders is actually a good idea.
Meanwhile, those who would or might potentially disagree are standing outside looking in because Karl Rove blacklisted them for writing a letter to the editor of a local newspaper like the Fargo Picayune six months ago.
There's no blacklist in a town or city hall meeting. No one cares about your political gang colors.
What I always like about that image is that those men in suits are *listening* to him.
I grew up at the New England town meetings and every type you mentioned was there: the garden club-vs-snow plow guys and road salt; the "set the record straight guy:" the nut who read the town budget line by line and wanted to obsess his way through it.
My father always said two things: about the crazier participants? "they are nuts but they are *our* nuts and once in a while they have a point"
and "that's democracy in action, don't you ever forget it."
I miss those out here in vote-fixed-Texas. Damn.
Way to make this Air Force girl cry at work, drift.
May I join the chorus of wow-I-just-found-your-blog-it's-incredible?
Hey we just did all this stuff here,lots and lots of meetings and committees and such, and got a major road project(that would have condemned my house and many others)cancelled,for now at least.In our meetings it was rich vs middle class,and we raised such hell we WON.Local democracy does work,you just gotta get involved.One of my neighbors was fucking TENACIOUS man,it was beautiful.
As always Drifty,simply stunning writing.
What an (the?) angry old broad said. Go to these meetings, people, get on the zoning boards and conservation commissions and select committees. Build the community you want to live in.
Even if you have to grab the pew in front of you.
-Marek
What an awesome piece! I'm going to borrow it (with attribution) and post it over on this City Planners community I'm active in. They will both recognize it, appreciate it, and maybe stop whining as much as we do about it.
Bravo, sir!
Ya' made me weep, ya' bastid.
Thanks for posting up this Rockwell painting; I hadn't seen it before. Old Norm had his political moments. My law school has a copy of "The Problem We All Live With" hanging in its lobby. It gave me some much-needed perspective on all the law school bullshit while I was working on my JD.
Brilliant. Just f-in brilliant. You, sir, are a friggin' writer
This should be etched on a large piece of stone, and that stone should be used to beat George Bush and Karl Rove about the head and shoulders.
and then drop it on their toes.
Here:
http://www.jsonline.com/news/metro/jul05/344075.asp
proof that, as you said, sometimes government can, and needs to be pushed. I'm a friggin ARCHITECT and I didn't see the need to drop 90 mil on this project to create a risk free enticement for out of town businesses to scavenge from local guys.
again, well done.
Proving definitively that humans don't possess telepathic or telekinetic powers because if we did, Horton would have heard all us Whos’ mentally shouting, "Shut up. Shut Up. Please, Holy Mother of God, it's 170 degrees in here and why won't this asshole Shut The Fuck Up!"
Also his head didn't explode.
I read that 5 minutes ago, went to get my dinner out of the oven and I'm *still* giggling. Brilliant.
However......
there is one form of Town Hall thingy that is The Abyss From Which No Life Escapes: condo board meetings. Oh. my. gawd. I used to work for a real estate company and I'd have to attend these at the properties the company owned. I'd walk out of them hoping that all the condo owners would die the most hideous, painful deaths imagineable. Humanity at its worst.
In San Francisco, if you have basic cable from the horrible Comcast corporation, there is a channel completely devoted to live City Hall meetings: Board of Supervisors, Police Commission, and my favorite, the Taxi Commission. It's become completely addictive when I'm working at home.
Your description of the public archetypes at these meetings was about as close to universal as can be, and you're right about the lovely surprises. I remember one Board meeting where an articulate gentleman talked about the mayor and the poor who finished with "you can put sugar on shit, but that still doesn't mean it's ice cream."
First, my many thanks for your many kind words. No kidding, they make my day and I do read 'em all, even when time or location prohibits more thorough replies.
Second, for the writers in the house, this was, for me, a prime example of the simple, "Keep Writing" maxim. I was dead tired, and did not want to put fingertip to keyboard, but it's a good habit, so I thought I'd slam a 100 words on a public hearing to keep my conscience quiet.
And after a dull couple of paragraphs it took a sharp turn into something totally unexpected.
If you want to write, just keep writing -- anything -- even if it's just a little bit and even if you think is sucks mightily.
Yes, we are fat, and lazy.
Thanks for reminding me of my only town hall meeting, the same cast was there in Fremont, Ca.
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Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans, 9% for PLUS loans. The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated togetherFederal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal governmentIn the United States, federal student loans are consolidated somewhat differently, as federal student loans are guaranteed by the U.S. government. In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year
Debt1consolidation.com entails taking out one loan to pay off many others. This is often done to secure a lower interest rate secure a fixed interest rate or for the convenience of servicing only one loan.
Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, which is most commonly a house (in this case a mortgage is secured against the house.) The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.
Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending Certainly many, if not most, debt consolidation transactions do not involve predatory lending.
In the United States, federal student loans are consolidated somewhat differently, as federal student loans are guaranteed by the U.S. government. In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year.
Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans 9% for PLUS loans. The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.
Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.
Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus; SLM Corporation (formerly Sallie Mae) does not report to Experian or Transunion which means that students will have differing credit scores at Equifax Transunion, and Experian.
Credit as a financial term, used in such terms as credit card refers to the granting of a loan and the creation of debt. Any movement of financial capital is normally quite dependent on credit, which in turn is dependent on the reputation or creditworthiness of the entity which takes responsibility for the funds.
A similar usage is in commercial trade where credit is used to refer to the approval for delayed payments for goods purchased. Sometimes if a person has financial instability or difficulty, credit is not granted. Companies frequently offer credit to their customers as part of the terms of a purchase agreement. Organizations that offer credit to their customers frequently employ a credit manager
Credit is denominated by a unit of account Unlike money (by a strict definition), credit itself cannot act as a unit of account. However, many forms of credit can readily act as a medium of exchange As such, various forms of credit are frequently referred to as money and are included in estimates of the money supply
Credit is also traded in the market The purest form is the "Credit Default Swap" market, which is essentially a traded market in credit insurance. A credit default swap represents the price at which two counterparties will exchange this risk — the protection "seller" takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis point being 1/100 of a percent) of the notional amount to be referenced, while the protection "buyer" pays this premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the par amount (i.e., is made whole).
Credit Education is the practice of providing consumers with information analyzing their credit behavior. Credit education is usually practiced by trained professionals knowledgeable in the analytics of the credit score and how consumer credit behavior effects both positive and negative credit eligibility. Credit education is usually assisted by sophisticated credit scoring models that mathematically assists the consumer, or counselor, in determining a credit improvement outcome.
Credit Education has become an increasingly practiced discipline due to sweeping increases in the use of the credit score and its affect on the prices consumers pay for loans, insurance, housing and utilities. It is also the major factor in loan eligibility.
Not to be confused with credit counseling credit education does not focus on debt counseling, nor involves the practice of collecting debt from consumers. Credit counseling and credit repair have consistently received negative publicity for its fee and management practices.
The largest suppliers for credit education data are Fair Isaac Corporation, CreditXpert and the three credit bureaus ( Experian, TransUnion and Equifax who deliver credit reports and credit scores. Among the largest providers of credit education services is Community Empower who, through the use of its own scoring models and national network of credit education counselors, provides consumers hands-on guidance using highly-trained local professionals.
Credit education has also received attention as a new discipline at the Community College level where new courses on the subject are being taught. Usually aligned with Mortgage Finance programs that teach college undergraduates principles of lending and underwriting credit education and credit recovery programs are giving students more extensive backgrounds in credit early in their careers. Among the early college level adoptors of credit education is the Los Angeles Community College District and Los Angeles Trade Technical College.
FICO is an acronym for Fair Isaac Corporation (traded publicly under the symbol FIC) and refers to the best-known credit score model in the United States, which is calculated using mathematical formulae developed by this company. The FICO score is primarily used in the consumer banking and credit industry. Banks and other institutions that use scores as a factor in their lending decisions may deny credit, charge higher interest rates or require more extensive income and asset verification if the applicants credit score is low.
FICO scores are designed to indicate the likelihood of a borrower being delinquent within the next 24 months. No public information is available to determine what the scores mean in terms of statistics. A separate score, BNI, is used to indicate likelihood of bankruptcy.
The three major credit reporting agencies (also often, but inaccurately referred to as credit bureaus) in the United States, Equifax, Experianand TransUnion calculate their own credit scores, which go by different trademark names as well as many different versions of the score (often differing because of what they are meant to predict and when they were written): Beacon, Beacon 96, and Pinnacle are all available only from Equifax; Empirica, Empirica Auto 95, Precision Score, and Precision 03 at TransUnion; and Fair Isaac Risk Score at Experian. These versions, while all developed for the agencies by Fair Isaac, differ and are periodically updated to reflect current consumer repayment behavior. The NextGen Scores are the most recent scores, but creditors vary in which version they prefer to use.
The scores use a multiple scorecard design. Each version uses 10 or more individual scorecards, and an individual is typically compared with similar others. (For example, a borrower with two 30-day late payments will be scored against a population with some minor delinquencies.) An individual is then graded according to what variables seem to indicate a repayment risk in that group. This feature may cause a borrower with delinquencies to score in the same range as a borrower without delinquencies.
Nearly all large banks also build and use their own proprietary statistical models for credit scoring purposes, often in conjunction with the FICO score or other outside scores.
The statistical models that generate credit scores are subject to federal regulations. The Federal Reserve Board's Regulation B, which implements the Equal Credit Opportunity Act, expressly prohibits a credit scoring model from considering any prohibited basis such as race, color, religion, national origin, sex, or marital status. Regulation B also stipulates that credit scoring models must be empirically derived and statistically sound. Furthermore, if an adverse action is taken as a result of the credit score ( e.g. an individual's application for credit is denied) then specific reasons for the denial must be provided to the individual. A statement that the individual "failed to score high enough" is insufficient; the reasons must be specific.
There exist several generally accepted algorithms for extracting the primary contributing factors to a low credit score. One or more of these algorithms is typically used to supply a list of reasons when a loan applicant has been denied credit, in order to satisfy the Regulation B requirement that specific reasons are disclosed. Some consumers feel these adverse action reasons are somewhat disingenuous, as the only determining factor for credit denials is a numeric score — the "reasons" are summed up only for the consumer.
Each of the credit reporting agencies has developed its own version of the credit score intended to compete with Fair Isaac's score. Although not as widely used, these scores (for example Trans Union's "TransRisk" score or Experian's "ScoreX" and "PLUS" scores) are less expensive than the FICO score. These scores are often derisively referred to by consumers and lenders as "FAKO" scores, for they do not use official Fair Isaac methodologies. The cost savings of a non-FICO score are tempting to some banks and credit card companies, who need an accurate risk assessment on millions of accounts every year. For ease of use, these scores tend to be mathematically scaled so that they fall in the same general range as the FICO score. Fair Isaac offers scoring models for the U.S ., Canada, and South Africa. It also offers a "Global FICO" for many other countries.
Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulae for calculating credit scores are closely guarded secrets, Fair Isaac has disclosed the following components and the approximate weighted contribution of each:
35% punctuality of payment in the past (only includes payments later than 30 days past due)
30% capacity used: the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
15% length of credit history
10% types of credit used (installment revolving consumer finance
10% recent search for credit and/or amount of credit obtained recently
The above percentages provide very limited guidance in understanding a credit score. For example, the 10% of the score allocated to "types of credit used" is undefined, leaving consumers unaware what type of credit mix to pursue. "Length of credit history" is also a murky concept; it consists of multiple factors - two being the oldest account open and the average length of time an account has been open. Although only 35% is attributed to punctuality, if a consumer is substantially late on numerous accounts, his score will fall far more than 35%. Bankruptcies, foreclosures, and judgments affect scores substantially, but are not included in the simplistic pie chart provided by Fair Isaac.
Further, Fair Isaac does not use the same "scorecard" for everyone. The scorecards are segmented so that there are over 100 different actual scoring models that are applied to different individuals based on different ranges of input values (some scorecard segmentations include: age, depth of credit history, etc.) The implications of this segmentation are that while the approximate weighted contribution above may be an average across all scorecards, individuals will receive different scores or weightings based on the scorecard segmentation that they fall into. Some consumers have noticed their scores decreasing by small amounts for no apparent reason.
Current income and employment history do not influence the FICO score, but they are weighed when applying for credit. For instance, an unemployed individual with no other sources of income will not usually be approved for a home mortgage, regardless of his or her FICO score.
There are other special factors which can weigh on the FICO score.
Any monies owed because of a court judgment, tax lien, or similar carry an additional negative penalty, especially when recent.
Having above a certain number of consumer finance company credit accounts also carries a negative weight (critics say that this causes a vicious cycle, locking people into continuing to use consumer finance companies).
The number of recent credit checks also can weigh down the score, although the credit agencies claim to allow for credit checks made within a certain window of time to not aggregate, so as to allow the consumer to shop around for rates.
A FICO score generally ranges from 300 to 850. It exhibits a left-skewed distribution with a US median around 725. 660 is generally regarded as potentially subprime and represents an important break point for credit worthiness. The performance of the scores is monitored and the scores are periodically aligned so that a credit grantor normally does not need to be concerned about which score card was employed.
Each individual actually has three credit scores for any given scoring model because the three credit agencies hold their own, independent databases. These databases are independent of each other and may contain entirely different data. Many lenders will check an applicant's score from each bureau and use the median score to determine the applicant's credit worthiness.
A new Vantage score has been offered by all three credit bureaus to creditors since spring 2006. It will soon be available to debtors. Its range is from 501 to 990. It is graded A (901-990), B (801-900), C (701-800), D (601-700), and F (501-600). It remains to be seen whether the Vantage Score will replace the FICO score or even be accepted by many creditors.
Debt1consolidation.com entails taking out one loan to pay off many others. This is often done to secure a lower interest rate secure a fixed interest rate or for the convenience of servicing only one loan.
Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, which is most commonly a house (in this case a mortgage is secured against the house.) The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.
Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending Certainly many, if not most, debt consolidation transactions do not involve predatory lending.
In the United States, federal student loans are consolidated somewhat differently, as federal student loans are guaranteed by the U.S. government. In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year.
Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans 9% for PLUS loans. The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.
Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.
Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus; SLM Corporation (formerly Sallie Mae) does not report to Experian or Transunion which means that students will have differing credit scores at Equifax Transunion, and Experian.
Credit as a financial term, used in such terms as credit card refers to the granting of a loan and the creation of debt. Any movement of financial capital is normally quite dependent on credit, which in turn is dependent on the reputation or creditworthiness of the entity which takes responsibility for the funds.
A similar usage is in commercial trade where credit is used to refer to the approval for delayed payments for goods purchased. Sometimes if a person has financial instability or difficulty, credit is not granted. Companies frequently offer credit to their customers as part of the terms of a purchase agreement. Organizations that offer credit to their customers frequently employ a credit manager
Credit is denominated by a unit of account Unlike money (by a strict definition), credit itself cannot act as a unit of account. However, many forms of credit can readily act as a medium of exchange As such, various forms of credit are frequently referred to as money and are included in estimates of the money supply
Credit is also traded in the market The purest form is the "Credit Default Swap" market, which is essentially a traded market in credit insurance. A credit default swap represents the price at which two counterparties will exchange this risk — the protection "seller" takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis point being 1/100 of a percent) of the notional amount to be referenced, while the protection "buyer" pays this premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the par amount (i.e., is made whole).
Credit Education is the practice of providing consumers with information analyzing their credit behavior. Credit education is usually practiced by trained professionals knowledgeable in the analytics of the credit score and how consumer credit behavior effects both positive and negative credit eligibility. Credit education is usually assisted by sophisticated credit scoring models that mathematically assists the consumer, or counselor, in determining a credit improvement outcome.
Credit Education has become an increasingly practiced discipline due to sweeping increases in the use of the credit score and its affect on the prices consumers pay for loans, insurance, housing and utilities. It is also the major factor in loan eligibility.
Not to be confused with credit counseling credit education does not focus on debt counseling, nor involves the practice of collecting debt from consumers. Credit counseling and credit repair have consistently received negative publicity for its fee and management practices.
The largest suppliers for credit education data are Fair Isaac Corporation, CreditXpert and the three credit bureaus ( Experian, TransUnion and Equifax who deliver credit reports and credit scores. Among the largest providers of credit education services is Community Empower who, through the use of its own scoring models and national network of credit education counselors, provides consumers hands-on guidance using highly-trained local professionals.
Credit education has also received attention as a new discipline at the Community College level where new courses on the subject are being taught. Usually aligned with Mortgage Finance programs that teach college undergraduates principles of lending and underwriting credit education and credit recovery programs are giving students more extensive backgrounds in credit early in their careers. Among the early college level adoptors of credit education is the Los Angeles Community College District and Los Angeles Trade Technical College.
FICO is an acronym for Fair Isaac Corporation (traded publicly under the symbol FIC) and refers to the best-known credit score model in the United States, which is calculated using mathematical formulae developed by this company. The FICO score is primarily used in the consumer banking and credit industry. Banks and other institutions that use scores as a factor in their lending decisions may deny credit, charge higher interest rates or require more extensive income and asset verification if the applicants credit score is low.
FICO scores are designed to indicate the likelihood of a borrower being delinquent within the next 24 months. No public information is available to determine what the scores mean in terms of statistics. A separate score, BNI, is used to indicate likelihood of bankruptcy.
The three major credit reporting agencies (also often, but inaccurately referred to as credit bureaus) in the United States, Equifax, Experianand TransUnion calculate their own credit scores, which go by different trademark names as well as many different versions of the score (often differing because of what they are meant to predict and when they were written): Beacon, Beacon 96, and Pinnacle are all available only from Equifax; Empirica, Empirica Auto 95, Precision Score, and Precision 03 at TransUnion; and Fair Isaac Risk Score at Experian. These versions, while all developed for the agencies by Fair Isaac, differ and are periodically updated to reflect current consumer repayment behavior. The NextGen Scores are the most recent scores, but creditors vary in which version they prefer to use.
The scores use a multiple scorecard design. Each version uses 10 or more individual scorecards, and an individual is typically compared with similar others. (For example, a borrower with two 30-day late payments will be scored against a population with some minor delinquencies.) An individual is then graded according to what variables seem to indicate a repayment risk in that group. This feature may cause a borrower with delinquencies to score in the same range as a borrower without delinquencies.
Nearly all large banks also build and use their own proprietary statistical models for credit scoring purposes, often in conjunction with the FICO score or other outside scores.
The statistical models that generate credit scores are subject to federal regulations. The Federal Reserve Board's Regulation B, which implements the Equal Credit Opportunity Act, expressly prohibits a credit scoring model from considering any prohibited basis such as race, color, religion, national origin, sex, or marital status. Regulation B also stipulates that credit scoring models must be empirically derived and statistically sound. Furthermore, if an adverse action is taken as a result of the credit score ( e.g. an individual's application for credit is denied) then specific reasons for the denial must be provided to the individual. A statement that the individual "failed to score high enough" is insufficient; the reasons must be specific.
There exist several generally accepted algorithms for extracting the primary contributing factors to a low credit score. One or more of these algorithms is typically used to supply a list of reasons when a loan applicant has been denied credit, in order to satisfy the Regulation B requirement that specific reasons are disclosed. Some consumers feel these adverse action reasons are somewhat disingenuous, as the only determining factor for credit denials is a numeric score — the "reasons" are summed up only for the consumer.
Each of the credit reporting agencies has developed its own version of the credit score intended to compete with Fair Isaac's score. Although not as widely used, these scores (for example Trans Union's "TransRisk" score or Experian's "ScoreX" and "PLUS" scores) are less expensive than the FICO score. These scores are often derisively referred to by consumers and lenders as "FAKO" scores, for they do not use official Fair Isaac methodologies. The cost savings of a non-FICO score are tempting to some banks and credit card companies, who need an accurate risk assessment on millions of accounts every year. For ease of use, these scores tend to be mathematically scaled so that they fall in the same general range as the FICO score. Fair Isaac offers scoring models for the U.S ., Canada, and South Africa. It also offers a "Global FICO" for many other countries.
Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulae for calculating credit scores are closely guarded secrets, Fair Isaac has disclosed the following components and the approximate weighted contribution of each:
35% punctuality of payment in the past (only includes payments later than 30 days past due)
30% capacity used: the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
15% length of credit history
10% types of credit used (installment revolving consumer finance
10% recent search for credit and/or amount of credit obtained recently
The above percentages provide very limited guidance in understanding a credit score. For example, the 10% of the score allocated to "types of credit used" is undefined, leaving consumers unaware what type of credit mix to pursue. "Length of credit history" is also a murky concept; it consists of multiple factors - two being the oldest account open and the average length of time an account has been open. Although only 35% is attributed to punctuality, if a consumer is substantially late on numerous accounts, his score will fall far more than 35%. Bankruptcies, foreclosures, and judgments affect scores substantially, but are not included in the simplistic pie chart provided by Fair Isaac.
Further, Fair Isaac does not use the same "scorecard" for everyone. The scorecards are segmented so that there are over 100 different actual scoring models that are applied to different individuals based on different ranges of input values (some scorecard segmentations include: age, depth of credit history, etc.) The implications of this segmentation are that while the approximate weighted contribution above may be an average across all scorecards, individuals will receive different scores or weightings based on the scorecard segmentation that they fall into. Some consumers have noticed their scores decreasing by small amounts for no apparent reason.
Current income and employment history do not influence the FICO score, but they are weighed when applying for credit. For instance, an unemployed individual with no other sources of income will not usually be approved for a home mortgage, regardless of his or her FICO score.
There are other special factors which can weigh on the FICO score.
Any monies owed because of a court judgment, tax lien, or similar carry an additional negative penalty, especially when recent.
Having above a certain number of consumer finance company credit accounts also carries a negative weight (critics say that this causes a vicious cycle, locking people into continuing to use consumer finance companies).
The number of recent credit checks also can weigh down the score, although the credit agencies claim to allow for credit checks made within a certain window of time to not aggregate, so as to allow the consumer to shop around for rates.
A FICO score generally ranges from 300 to 850. It exhibits a left-skewed distribution with a US median around 725. 660 is generally regarded as potentially subprime and represents an important break point for credit worthiness. The performance of the scores is monitored and the scores are periodically aligned so that a credit grantor normally does not need to be concerned about which score card was employed.
Each individual actually has three credit scores for any given scoring model because the three credit agencies hold their own, independent databases. These databases are independent of each other and may contain entirely different data. Many lenders will check an applicant's score from each bureau and use the median score to determine the applicant's credit worthiness.
A new Vantage score has been offered by all three credit bureaus to creditors since spring 2006. It will soon be available to debtors. Its range is from 501 to 990. It is graded A (901-990), B (801-900), C (701-800), D (601-700), and F (501-600). It remains to be seen whether the Vantage Score will replace the FICO score or even be accepted by many creditors.
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