paper about the importance of credit scores
Credit scores are vitally important to people. across the world and especially in America. to have credit means that you have established yourself to be offered credit which means you have a high income with low debt and usually the way a person obtains credit is through a car loan or a secured credit card. When you have established your credit and you have maximized it (reached your credit limit) there can now be adverse effects to your credit score.
Now that you have credit or spending power and as a consumer you start to use this spending power you incur credit interest. The interest you incur can add up quickly the more money or credit you owe and Linda Sherry, the director of national priorities for community outreach and advocacy organization Consumer Action shares that its common industry practice to charge interest on the entire amount owed and this includes any new purchases. Norman Silber, a law professor at Hofstra Law School also shares that many consumers believe that they have a grace period and when consumer believe this it ends up costing them and they keep incurring additional interest charges.
The spending power that the consumer has besides incurring interest charges also their credit card score starts to change due to the usage of the credit and ounce this downward trend starts it's much harder to pay off the debt and start to increase their credit score again. This scenario then can limit your ability to gain further credit and can start a downward spiral that can include; potential negative credit scenarios such as bankruptcy, accounts in collections, late payments of your credit cards and the combination of these discrepancies show the three big credit reporting agencies that you are not responsible with your fiscal means (money management).
E.R. retrieved 4/8/17 creditcards/credit-card-news/credit-card-residual-interest-1268.php
There are companies Experian, Equifax, and Trans Union "the big three" that help you to understand your credit score and offer free suggestions/guidelines or a subscription service for a fee for a monthly monitoring service. The monthly service is valuable as it is usually Android and Apple friendly which means you can get alerts on your phone and check for any discrepancies on your credit report from one of the big three credit bureaus.
One time a year you can get your free credit score report from any of the Big three credit bureaus Experian, Equifax, and Trans Union. Having credit in America is not a given an ounce you have figured out a way to start to establish credit being responsible is vitally important as it's easy to "charge it"; and then credit debt starts to add up quickly as you get offers in the mail for more credit, this is potential credit and its exciting to know that you could have this potential spending power as you can get things (rims/tires for your vehicle or that extra big TV you always wanted).
As a consumer when you take up the credit card companies on their offers of credit this is a catch 22 as you increase your credit, however if you utilize that credit then debt increases. As a consumer trying to trade in your vehicle and upgrade to a newer car when you still owe on the old car there will usually be negative equity (money that you owe on the car loan but the value of the car from the dealer is not worth what you paid for the car). This can be a frustrating experience as a couple of things happen, its hard to roll that negative equity into your new loan and still have a reasonable monthly bill as you don't want to have a car loan bill that is so high you struggle to pay it. Or worst case scenario would be that you make your car payment and your other credit card bills are left paid late which can incur late charges and drastically effect your credit score or not paid at all which is a recipe for disaster.
There are other companies out there that offer people who are in this credit card spiral to "help them increase their credit score in as little as three months with a monthly fee for service. This fee for service can be very steep, especially when a person is already in credit card debt to add another bill will limit their ability to pay current credit bills down.
The BBB Better Business Bureau is a great way to check into companies that may have questionable slogans as a part of their sales pitch. The BBB grades companies on different principles complaints against the business, the size of the company and whether the company responded to the customers' complaints. The BBB assigns letter grades A, B, C and D and even F. E.R. Retrieved 4/3/17 bbb.org/council/overview-of-bbb-grade/
One of the credit companies that I found reviewed on the BBB is CreditRepair Inc this company has a D rating with the BBB, this company charges $99 dollars a month for their service and on their webpage, it shows that most customers can see a 40-point increase on their credit score and offer a monthly report with an app that can be viewed to check your credit score. E.R. Retrieved 4/3/17 creditrepair
The consumer complaints against this company vary depending if you are looking on the BBB website and the company has appeared to be willing to refund people's money that lodged complaints on the BBB website.
if you look at CreditRepair website it has success stories promoting their product which is be expected of a company promoting their product.
The interesting fact that the Big Three credit card companies do not promise a credit increase in the products that they offer shows that they share free credit card advise and offer the monthly monitoring service so that the consumer can become more knowledgeable about their own credit.
The credit card repair companies offer you advise and services for an exorbitant monthly fee when most of the information on increasing your credit is available for free and the monthly monitoring service is charged at a reasonable price.
As a consumer, you control your credit score to a degree so if you are a beginner then reading up and becoming knowledgeable about how the credit system works can/will impact your credit score. The consumer that is knowledgeable about the credit system will have a huge step up on those who don't do their research on the topic however discipline is key in not putting yourself in a bad position.
Just like with most companies there are legitimate ones that offer you real knowledge and support mostly free and then there are the companies that offer you the world in their product and charge you for that world. When a consumer utilizes a company like the BBB it can shed light on some of these companies that offer you something that seems unrealistic and you can get other consumers reviews of how the company worked for them and thus make in informed decision about whether or not to utilize their services or not. Your credit score is important, maybe more important than you know and hopefully this paper gives you as a consumer a better idea on what you can expect and why its important to be informed about your credit and how it can affect your life.