This is a guest post by Joshua Heckathorn, who runs Creditnet.com and holds an MBA and B.S. in Finance. Creditnet is a free resource for anyone who wants to learn more about credit or debt and compare hundreds of the best credit cards online. When Josh isn’t glued to the screen of his Mac, you’re bound to find him at the nearest rock-climbing wall or sushi joint around Seattle.

It’s been just over a month since new rules took effect requiring free credit report sites to prominently disclose that there’s only one place to truly get your credit report for free—AnnualCreditReport.com.

Because of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, the process of getting a credit card is going to drastically change for people under 21 years of age.  Starting on February of 2010, people under 21 will not be allowed to get a credit card without a co-signer or proof that they can repay their credit card debt.  At Wallet Blog we have already made it clear that this part of the credit card law is completely unfair and ridiculous as it singles out people under 21 years of age for special treatment, even though they are legally adults.  

No matter what politicians decide, credit history is going to continue being a critical factor in determining loan amounts and loan interest rates (as it should be).  However, since it is now harder for people under 21 to get credit cards, they will have less time to build up their credit history and will be at a disadvantage for anything that requires a credit check (like getting a loan or even renting an apartment).

There has been a lot of press surrounding the release of Fair Isaac’s new credit scoring system, FICO 08, and in my opinion the new FICO has been overhyped.   Nevertheless, both consumers and creditors should be glad to have it since it is a marginal improvement in the critical area of credit risk analysis.

The benefit of an improvement in this area must be understood in light of the credit industry’s reliance on the shared responsibility of all borrowers. In such a system, even the most responsible borrower suffers due to flagrantly irresponsible behavior by others.  Wide spread credit problems, then, have a disastrous effect for all borrowers—those who pay their bills on time as well as those who don’t.  Right now, the general condition of credit throughout America is hurt by the awarding of loans to individuals who can’t pay them back.  Any improvement in this area will better separate people who are good credit risks from bad so that banks can do better in distinguishing who should get a loan.  Ultimately, this leads to fewer losses for the banks and allows them to pass savings on to borrowers who are reliable.