Huge numbers of Americans are discovering that their credit score has been adjusted in their favor by as much as 30 points. New standards for the use of public records mean that tax liens are now excluded from credit reporting. This news will hearten those who were previously on the borderline to reaching “good” credit, but it does little for those who are trapped by poor ratings. Consumers are encouraged to know what their credit scores are, and to take steps to repair them, but why is it so important? Has the problem stopped being the spending habits of a few irresponsible individuals? Is it now the system itself?
Creating A Vicious Cycle In A Few Easy Steps
Credit ratings replaced a bank manager getting to know his customers, when this became infeasible in our exponentially growing society. The premise behind credit checks is a sound one: it is unfair for those who are responsible with money to be penalised for the failings of those who are not. Unfortunately this simple concept has gotten out of control. Companies gather information about how quickly bills are paid, your arrest record and your debts, but this information is collated utterly without context. In the beginning credit reports were only used by banks, to make lending or credit card issuing decisions. Now almost every aspect of your life will be impacted by your credit score.
The Cycle Starts
Bad credit can start at any time, for any reason. Sickness, loss of employment, an economic downturn, a change in circumstances, or even just plain forgetfulness can cause that first missed payment. Even if the bill is missed due to completely irresponsible reasons initially, it does not mean that person is necessarily always going to make such poor choices. Worse still, it doesn’t even have to be your debt. Credit reporting companies make mistakes all the time and people gain entries for things they didn’t even do. The impact of the first instance may not be felt immediately but it is a pebble falling down a snowy hill.
The Pebble Gathers Snow
One late payment does not have a massive impact on your score but a second is considered a pattern. Alone these incidences mean little but when an emergency strikes, an opportunity comes or an unexpected payment is needed; suddenly credit that was previously open, is suddenly not available. Overdrafts will no longer be extended, creditors will not allow a deferred payment, or loans are rejected. The buffer that those with moderate to good credit have has vanished.
The Cycle Becomes A Trap
Payday loans and credit cards can offer a way to pay bills that are due when your salary gets out of sync with your bills but each month you lose out a little more and get further and further in the red. This isn’t the worst aspect of poor credit scores. It is bad enough that short term loans or overdrafts that could have helped prevent the spiral have gone, but now you have bigger problems. Poor credit score means that you cannot rent or buy a property, even if you wish to downsize. A poor credit score means that in some States you could be turned down for a job, rejected for a promotion, or even find yourself fired.
What Can Be Done To Help
The most important thing to do is to obtain your credit report and thoroughly examine it. A large number of Americans have poor credit ratings due to the actions of others, poorly recorded histories, and other mistakes by third parties. Any inaccuracy or dispute with the credit bureau needs to be investigated immediately. It is vital that, as much as possible, you avoid adding anything new to your report. Take a good look at your finances and work out the best time to pay bills. Contact everyone you pay and try to move your payment day to the time that suits you; then set up payment reminders. Start paying off your debts. It doesn’t matter what size of payment you make, the key is to be paying it off. Bad credit cannot be fixed overnight, there are no quick boosts to be had. Keep your credit card balances low and pay them off in full as soon as you can.
It is becoming almost impossible to function as a citizen if you have poor credit. Whilst many Americans are seeing boost in their ratings, many more are being labeled as unclean due to the mistakes of the companies that are supposed to be protecting us. More than anything else all Americans should check their credit histories and vigorously dispute any mistakes they have made.
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