What is the role of perception in understanding consumer credit behavior? Let’s explore the not so obvious. The dictionary list the meaning of perception as “The process, act, or faculty of perceiving.” Most of the decisions that are made everyday may be tied to ones own individual perception.
Several questions come to mind. How did consumers become conditioned to accepting the practice today known as credit scoring? Who are the major players and influences that make this possible.
If consumers are not satisfied with the status quo why haven’t consumers demanded a more viable alternative?
The fact that consumers are dissatisfied and feel alienated may be attributed to their own perception or the methodical controlled conditioning of their perception of credit by others.
There is a simple means for consumers to participate on a level playing field with their creditors. However it will require a stark change in perception. A complete paradigm shift is needed from the on set, an evolution of sorts in consumer behavior.
Consumers must perceive themselves and their credit quite differently than what is done today.
A new set of rules, terms and phrases must be learned. No, there is no need to go back to school or simple bury oneself in a mountain of books. I can assure you that these new expressions are already in your current layman’s vocabulary. All you need to do is transfer the same terms used everyday into your new found awareness and perception of your credit.
It is without doubt most consumers are very value conscience today in the present economy.
The definition of value is equivalent worth or return in money, material, services.
A new reality in understanding and expecting to receive fair value in any transaction were credit is the deciding factor is your right as a consumer. However one will not perceive it as one’s right unless one expects and perceives it to be so.
For an example a consumer shopping for a new refrigerator for their home would expect to receive fair value for their hard earned money. If there next purchase is a big ticket item requiring the use of their credit to make the purchase should not the same level of expected fair value come into play? Only this time the consumers is focused on getting fair value in the credit transaction. If the consumer accepts only one creditors perception of their credit it is highly unlikely that the consumer received fair value.
The most efficient means for determining fair value in the credit transaction scenario is the use of an open auctioning format comprised of multiple bidders. This is where multiple lenders would offer an interest bid to the consumer based on the consumers credit and credit score thus providing fair value to the consumer.
Plain and simple when consumers perceive that their credit has monetary value, proves accepting anything less than fair value is not acceptable in the marketplace.
The next term to explore is monetizing your credit.
A financial dictionary definition for monetizing: To convert into money
The interest rate received in a financial transaction is converted into money.
A consumer buying a car using credit to apply for an auto loan can count on the following.
The lender will convert the consumer’s credit into an interest rate during the loan process.
Consequently the interest rate is converted into money determining the amount of profit the lender will make on the loan. Make no doubt about it the lender monetized the consumer’s credit to make a profit. Consumers should have the same opportunity to monetize their own credit to save money during the credit transaction. Now providing a level playing field for consumers.
The car buying scenario above allowed the lender to have sole discretion over the monitization of the consumer’s credit based on the lenders perception. The consumer had very little if any choice in the matter other than being accountable for the ensuing debt.
However the above example describes how things are currently done today when borrowing and lending.
A consumer walks into a car dealership with credit score along with credit report in hand from one of the reputable credit report agencies. The salesman will say sorry, but we will have to pull a credit report and we can’t accept the one you have on hand. However, the salesman did not say the dealership will pull the credit report from the same credit reporting agency. The dealership accessed credit report detailing the consumer’s credit will without doubt indicate a much lower credit score. Resulting in a higher interest rate for the consumer and greater profit for the lender.
How did the above car buying and car loan experience make you feel?
Did you feel your best interest was being served. During the transaction did you feel empowered? Were their feelings of helplessness?
Did you feel you received fair value for your credit or did you feel overwhelmed and taken advantage of throughout the sales and lending process. Were you made to feel that this is just how things are done and there is no better alternative available? Were you made to feel this is standard practice?
As a consumer would you not prefer to have a choice of which interest rate you could chose to accept based on fair value? Why not have multiple interest rate bids from lenders offered to the consumer based on the monetary value of the consumers credit?
There is not a better method to bring fair value to the consumer and create a leveling of the playing field other than by monetizing the consumers credit. Here is the proof.
What do hard working consumers desire most often or should expect when purchasing a big ticket item using their credit?
Choice
Value
Saving money
Possibility of lower interest rates
A level playing field with creditors
Fair monetary value for their credit
Leverage of credit in the marketplace
A consumer credit score and credit auctioning and bidding process can offer benefits to all. An auction format would help consumers: discover monetary value of credit in the marketplace, receive fair value, feel empowered to leverage credit , possibly lower interest rates and save money.
It is a win – win opportunity for all through out the borrowing and lending process.
Current events are shaping new trends. Catch the wave of the next exciting and rewarding consumer trend becoming widely known as the monitization of consumers credit.
Artificially low interest rates driven down by the federal reserve during the recession can not be sustained indefinitely.
There are many who believe the next economic foe on the horizon is inflation and this will create a much higher interest rate environment for everyone. Thus the need for consumer credit monetizing becomes more beneficial and important for borrowers now and in the future.