Suze Orman has an intriguing idea, but it comes wrapped in a flimsy package.
You might appreciate the idea, too, if you think FICO and the credit-scoring groups do a lousy job of rating some people who are responsible with their money.
I am talking about Orman's new prepaid debit card called The Approved Card. Like other prepaid debit cards, it is not something I would recommend to most people. Finding a bank or credit union offering a debit card free of fees would be a better alternative.
But the potential gem here is that Orman has talked one credit-scoring firm, TransUnion, into following transactions of people using The Approved Card. And Orman hopes that TransUnion sees a spending pattern by users that might prompt the firm to adjust how credit scoring is done.
Orman says she is not sure where this will lead, and TransUnion did not provide much clarity. When I asked about the program, a spokesman e-mailed: "TransUnion is committed to supporting Suze's efforts to understand the impact of prepaid card use on an individual's credit health."
Maybe that merely means that TransUnion wants to get along with someone who appears on millions of TV screens.
But you have to welcome the possibility that something new might happen with credit scoring. Over the years, I have heard from many people befuddled and peeved with the entire credit-scoring process. It is a secret yet crucial process to most American consumers, because to a large extent credit scores control whether you get a loan for a home or car and what interest rate you will pay. Because employers and landlords have access to the scores, they can determine who gets an apartment or even a job. In an era in which busy lenders, employers, and landlords cannot afford the time to do a serious investigation, a quick glimpse at a person through a credit score has become the shortcut of choice.
In the mortgage debacle, a pretty credit score was all a lender needed to approve a loan for someone who could not afford to pay.
