Give yourself credit

The days leading up to Christmas may seem interminable, but afterwards the space-time continuum actually warps, and it seems like our Christmas credit card bills have arrived before the wrapping paper ever hit the floor. So we’re up against an unholy conspiracy of astrophysics and economics, which is a pretty scary situation, all right.

Of course, a lot of folks know that already. A good chunk of Saipan’s households are addicted to irresponsible credit use, which just goes to show that the islands can be every bit as American as the real live U.S. of A. is. But, heck, even responsible credit use is a dicey enough gig these days.

I’m sure hooked on the “fantastic plastic.” For some reason that I can’t remember, my pal Fred had concluded that there were advantages to be had in charging every possible expense on that magic green machine, the almighty Amex card. Fred is a plenty smart guy, so if he jumped off a cliff I’d probably follow along, since I’d know he had thought the whole thing out.

Anyway, we discussed the matter (Amex, not cliffs) in great detail over beers in Garapan; the details now elude me…was it frequent flyer miles? Some kind of money float? Darned if I know. But I do know the resulting addiction to Amex can’t be kicked. I pay off those things every month, so it’s not really the credit I’m using, it is the transactional and administrative convenience. Crazy world, this, in which plastic is actually a better transaction mechanism than real cash itself.

The Commonwealth has a weird consumer credit situation. Article 12, of course, makes mortgage lending a really slippery proposition, so it is a pretty inefficient market. Furthermore, a lot of foreign contract workers are in the islands to save, not spend, and many don’t participate at all in the formal credit markets. Tourists with their “JCB” cards are, of course, tapped into Asian credit, and I have no idea how that works. Meanwhile, the local market (which is really the U.S. market, via local banks and U.S. credit card companies) for credit has two very distinct tiers: Folks with good credit, and folks with completely toxic credit.

You may or may not have dealt with this, but the credit folks have cooked up a “score” that is sort of like a financial version of a Grade Point Average. It’s called the “FICO” score, so named for the company, Fair Issac and Company, that invented it. The score runs from 300 at the lousy end of the scale to 850 at the top end.

In preparation for this column I asked a credit expert with a bank how to get a FICO score of 850, and she said that the highest score that she’s really ever seen is 820. Merely paying your bills on time isn’t enough to land a top score, there are other factors such as how long your credit history is, how much available credit you have, how much of that available credit is used, and, well, that’s all I can figure out. Anyway, bottom line: If you ever think you’ll need access to credit, including credit cards issued by banks with CNMI branches, your FICO score is one mondo important number.

There are a number of ways to check your FICO score and credit report, and the way the banker recommended is to subscribe to a service called “True Credit,” which is offered by TransUnion, one of the big three credit reporting agencies. The magic of the Internet enters at this juncture, and you can actually monitor your data on-line. Prices for this stuff range from about five to 10 bucks a month, and the True Credit web site is, logically enough, TrueCredit.com.

The other credit reporting services, Equifax and Experian, also have services similar to True Credit. And remember the company called Fair Issac that I mentioned? They, too, have a site at MyFico.com.

I use a couple of credit monitoring services and I think it’s a good investment.

In fact, this credit thing is going to be a bigger part of my life in 2005. As some of my friends know, a business that I was setting up in Saipan earlier this year was victimized by two American swindlers (one haole, one Chinese-American) posing as investors. While my attorney does his gig, on my end of thing I have resolved to request credit reports from any potential associates or investors, unless I’ve known them personally for years and years. The information in credit reports, or at least related reports, can include things like criminal histories, address and employment histories, etc. The crooks like the CNMI because they can try to hide in the cracks between jurisdictional boundaries, so you can’t be too careful. Believe me on that one!

And so we wind up this year talking about credit, which we’ll no doubt contemplate again a few times in the coming year.

(Ed Stephens, Jr. is an economist and columnist for the Saipan Tribune. Ed4Saipan@yahoo.com)