Tackling Bad Credit With The Fair Credit Reporting Act

What is Bad Credit?

Bad credit is when your credit report score or the ‘FICO report’ score is below par. If you have bad credit, you will have to put up with high interest rates, and may not be eligible for personal loans and mortgages. In addition to this, you may have to face penalties as well.

What is the Fair Credit Reporting Act?

It is a federal act that promotes accurate information and the consumers’ right to keep their information private. It is primarily concerned with consumer reporting agencies such as financial bureaus.

How can this act benefit people with a bad credit score?

Every American citizen is entitled to certain rights under this act.
First of all, you have the right to know if any information in your credit report has been used against you. So, if your loan or mortgage application is rejected because of a low credit score, you will be alerted to take appropriate action.

Secondly, you have the right to know what is in your report. This can help you in two ways. First, you would be able to spot the cause behind your low credit score and work on those areas. If you have too much current debt, too many accounts or pending debts, you can focus on those issues. Second, you will also have a chance to dispute a creditor or a financial bureau regarding any false errors on your list.

A significant percentage (20%) of credit reports is said to be faulty. So, there is a good chance your score is as less as it is because of inaccurate reporting or false charges.

Credit Restoration services are your best bet when you are trying to get your credit score up. The experts of such companies have the competency to spot every error on your report and dispute with a creditor or one of the three financial bureaus, which are:

Equifax

Experian

TransUnion

The reason you should take professional help is because they fully understand the extent of your rights. For example, you may not be able to distinguish an outdated piece of information on your report, which as per the act, you have the right to get removed.

A reputed credit services company handles such cases on a daily basis so they know how to dispute with creditors and bureaus. If the entries on the credit report prove to be inaccurate, the credit repair company will get them removed.

 

Managing Your Credit Scores In Your 20s

downloadAge brings with it wisdom especially when it comes to taking financial decisions. A 40-year-old may be aware about more of credit repair facts and myths as compared to a 20-year-old. However, there may be instances when people may be stuck with similar credit issues irrespective of their age.

To begin with, the key to improve your credit score is – a dynamic focus. You need to seek help from a proficient credit repair specialist and then prioritize certain things as you age in order to do away with the issues that come in your credit domain.

Things to Consider in Your 20s to Improve Your Credit Score:

In your 20s, there are specific things that calls for your attention, when it is about enriching your credit health.

Attend to the five Factors:

The first step to improve your credit score is to have a clear understanding of the rules. The actual status of your credit score is determined by five factors – debt utilization, payment history, new credit, credit length, and diversification. If you were unaware of the essential factors that have an impact on your credit score, you need to work on the strategies that will help you to take care of the five factors.

Repay your student loans:

As stated by The Institute for College Access and Success (TICAS), about 69 percent of the students left college with loans in 2013. The bottom line (which was $28,400) was actually a big burden for the salary of a fresher. You have a choice to stretch the loan for whatever time span you want to (years or even decades), but you also need to keep in mind the downside of the decision.

Adding on the interest will not only increase the principal amount and will also increase the life of the loan. This will increase the overall cost of the loan that you have taken. Paying off your loans at the earliest will lead to a lower credit utilization ratio, better and more opportunity to improve your credit, less stress on your budget, and last but not the least even more opportunities to save.

The final tip:

Credit score plays a vital role in every phase of your life whether you are in your early 20’s or 50’s and beyond. Analyze your credit score regularly to ensure that you maintain a positive credit and avoid any problems related to your financial plans.

Which Type of Credit Do I Choose

Lots of us face this question if we’re in the position to access new credit, and that is what type of credit do you choose? There are several different types of credit extended in numerous ways. For instance there are charge cards which usually don’t set a limit BUT require payment in full every 30 days. Next you have your simple credit cards, where a limit is set and you’re allowed to pay that back in minimum payments if you so choose BUT you also pay lots more interest over time. There are some credit cards that offer 0% interest for your first 12-18 months so it’s best to know what to do. Then of course there is the mortgage for your home or personal line of credit. This type of credit or loan usually comes with origination fees along with interest that is paid back to the lender over time. Depending on what your current credit situation is these fees mentioned above could be higher or lower or irrelevant altogether.

Let’s discuss the Charge Card and Credit Card scenario. First off a charge card will allow you to spend what you need to on purchases. When the lender for a charge card issues credit typically there is no set limit, however they do closely monitor you’re spending to minimize their risk of loss. You do need to pay the credit used back at the end of every month in order to eliminate late fees or closure of the account. Credit cards play a different role. This type of credit issued by a bank or private lender has a set limit after signup. Meaning the lender will look at your credit score and decide how much they are willing to allow you to use before they feel you’re too high of a risk. Some of these credit cards start out low but can quickly have limits raised over time by showing excellent payment history. Remember you can roll this type of credit month to month as long as you don’t miss your monthly payments. Keep in mind you NEVER want to use more than 30% of your available credit. When this happens 2 key things happen:

1) Your credit score drops no doubt about it.
2) Your now looked at as high risk to lenders by using too much credit.

It certainly is a cat and mouse game on knowing how much credit to ask for and how much credit to use – believe me I know. It can be tough. You don’t want to fall into these categories it can be hard to dig out once you do.

Finally let’s talk about the personal loan or line of credit. I have seen this type of credit become what most folks go after; I assume they just heard something and don’t really get it. When deciding what type of extended credit you need the first question asked should be what do I need the line of credit for? There are a few distinct differences you need to be aware of. If you’re doing a home remodel or need to fix some landscaping or build a garage, do you know what type of credit you need to get? A line or credit will have origination fees, interest rates, additional fees and a set term(s) for repayment. This will be true for a credit card except you can get interest free credit lines for up to 24 months in some cases. You can also get a lower interest rate depending on your credit score. Also your ability to show lenders you can pay back the debt with no stress will certainly play well for your case.

Whatever road you travel in life it’s important to be informed. It’s important to do the research and fully understand the situation you’re getting into. I included in this, we all want things yesterday and rush into situations. When we look back we all understand it could’ve been better for us had we took a little more time and did a little more research. That’s okay. Doing nothing gets nothing. Don’t expect life to just present you the answers to your questions, you need to find them yourself. Don’t think you won’t understand or can’t know. We all have the ability to find out. I hope you find your answers. Don’t give up. Only a small percent make it because only a small percent put forth the effort. It’s not science its common sense.