Denied! Millennial’s Battle With Credit

Combating Credit in this Era

Let’s start out by saying what everyone already knows, the credit system is flawed and predatory in many ways. The concept of paying back what you have borrowed is pretty straightforward and  providing an incentive to pay back your debts is needed, but how credit affects your life outside of your initial purchases is where we encounter some of the initial issues. Combating fraud, data entry incompetence, lack of history, credit discrepancies and general ignorance of the system stand between us and the life we are meant to live. If life is what you make it, then the person that is financing the jet ski under my name has been living my best life! 

The Necessity of Credit

Credit seems to be this metaphorical door that when opened, can lead us down a road of wonderment and bliss, but can also send us to the brink of financial destruction. When I thought of credit when I was in highschool, I believed that credit cards were to be used when an emergency arose and you didn’t have the money to handle the situation and was a factor in acquiring a home and vehicle . Now I understand that credit makes up a little bit of everything in our life; jobs, car insurance, renting an apartment, bills, the list goes on and on. Are we really living our own  life here or just borrowing pieces of it from one another until we are unable to borrow anymore? Am I just going to be stuck in a constant wage grind to keep everything paid off and my scores high? Why didn’t schools teach us how any of this works instead of the symbolism in Moby Dick and square dancing? Sit down, be quiet and stop asking questions that don’t pertain to the rich world of Geology! 

You Need Credit to Build Credit.

Is anyone else getting sick of the catch-22 that “you need credit to build credit?” As a millennial, I think I have heard this more than the phrase “You need 5 years of prior experience for this entry level position.” According to Bankrates latest survey  58% of millennials have been denied some sort of financial product due to their credit score and the rate of denial seems to increase as the years go by. I swear I haven’t been using my credit to finance avocado toast and Ricky Martin vinyls, so what is really going on and why are denial rates so high? Well, this failure rate may partially be due to legislation enacted in the last decade. “An unintended consequence of the CARD Act, which went into effect in 2010, is that it has become much harder for people in their early and mid-twenties to obtain credit,” says Ted Rossman, industry analyst at Bankrate. “Establishing credit is a lot like getting started in your career. Everyone wants you to have experience, but it’s hard to get that first experience.” Considering that the length of credit  history makes up a little over 15% of your overall credit score, lacking this “experience” is detrimental to personal credit progression.

How Am I Supposed To Build Credit?

Building credit with no credit can seem like a daunting task due to the “you need credit to build credit” motto that resonates like nails on a chalkboard, but this is not an impossible feat by any means. My time at Credit Law Center has taught me that building credit is like building a home and that you need to form a sturdy foundation before you can begin to think about anything else. In this case, our foundation starts with a secured credit card acquire from our bank. Keeping a low utilization rate of your card and making payments on time are the first step in building this house and getting on with your life of working 2 jobs to afford basic essentials! Next, acquiring  an installment loan and an actual credit card can really get this ball moving. Don’t forget, the second verse is the same as the first, “make payments on time and hold card utilization below 30%!”. 

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Ok, I’m Building Credit…What’s Next?

Now that your credit is slowly climbing it is time to STALK. YOUR. CREDIT. I mean we are talking white radio van in the neighborhood kind of stalk, creepy phone calls and obscure photographs of that 750 score in the background! Ok, that may be a little much, but you really do need to monitor your credit with vigilance and poise if you want to keep those numbers up. According to the Fair Credit Reporting Act, you’re able to request one free credit report per year from Experian, Equifax and TransUnion. OK, one pull a year is really not going to cut it in this case so we need to get a little creative in how we acquire our information. The good news is that many credit card companies offer free tools that allow you to view your scores and the items associated with them monthly.

The Bottom Line

I wish I could say that I have been able to provide you with every tidbit of information that you will need to navigate this post apocalyptic  credit wasteland we are all attempting to survive in, but I have only scraped the surface of this beast. The bottom line is that credit is not always fair and we are stuck in this together without any sight of a “No Borrower Left Behind” law gracing us in the near future, but having a strong understanding of your score and knowledge over how to build credit in a healthy fashion can be the defining factor in a successful life  or a stressful one.

Article by Joe Peters

Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.

If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.

There’s More To Credit Than Meets The Eye

Understanding Your Credit Score

Credit has become so essential to most big purchases you as a consumer will have to make, and that can be scary if you do not know how credit works. Credit can be confusing, but the more you can learn and utilize your credit effectively, the better off you will be in your financial future.

A credit score above 700 is typically considered good, and if it is above 750 then that is excellent. 800 is typically the highest and 350 the lowest on most credit scales. This score is determined through 5 different factors:

  1. Payment History: Late payments will lower your credit score.
  2. Amount Owed: If you have a high credit utilization ratio, then your score will be lower. 
  3. Length of Your Credit History: The longer you exemplify responsible financial behavior, the better your score will be. On average, most people in the excellent credit category have a credit history exceeding 7 years.
  4. Your Credit Mix: Having a diversified credit portfolio including multiple different types of credit should help increase your credit score.
  5. New Credit: The more often you apply for credit, the worse your score will be. Opening new accounts also lowers the average length of your credit history, which effects factor 3 on this list.

Other Possible Influences on Your Credit Score

Joint accounts can affect your individual credit score. So, a late payment by either party included in the joint account can hurt both people’s credit.

Student loans are also dangerous for young people who do not know how to manage their credit year. Making sure to make these payments on time can be very beneficial to a student’s financial wellbeing in the future.

Raising Your Credit Score

Bad credit can seem scary and overwhelming, but it is not irreversible. Through responsible financial behavior and potentially the help from credit repair companies, you can raise your score to a level you will be proud of. Keeping an eye on your credit and just being mindful of your financial habits can go a long way in raising your score.

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Fun Facts About Your Credit

Knowing as much as you can about credit and credit scores in general can actually be very beneficial to your everyday life. Although dealing with credit may not always be the most fun activity, impressing people with all of the knowledge you have about credit might be slightly more entertaining. So, here are some “fun facts” about credit you probably did not know before!

  1. Around 40 percent of United States consumers have applied for new credit a minimum of one time this year. Obtaining new credit does make up 10 percent of your credit score too.
  2. Minnesota has the highest average FiCO credit score in comparison to the rest of the states in the United States at 728. Some may argue that this is because of their conservative debt managing strategy, their booming Twin Cities economy, their low natural rate of unemployment, or their low cost of living.
  3. The average FICO credit score in the United States is 704, which is actually not a bad score. Keeping your credit score above average will make you stand out more, though, when applying for credit. There are ways to get it up too if your score falls somewhere below the national average.
  4. Keeping your credit utilization ratio low is very important when it comes to keeping a good credit score, which is why consumers with scores about 785 use only about 7 percent of their credit. The lower that percentage, the better your score.
  5. On average, American consumers have about 14 credit accounts open and about 5 credit cards reported on their credit report. As long as payments are all made on time, there is nothing to worry about here.
  6. The top 1 percent of consumer credit would be those consumers with scores of 850. You do not have to keep your credit score this high to be considered a responsible consumer, though. Scores ranging between 670 and 739 are also considered good.
  7. FICO scores are what are checked most commonly by lenders with a usage rate of over 90 percent.
  8. Poor credit scores would be those falling below 580. Only about 16 percent of American consumers fall into this group.
  9. Fair credit scores range between 580 and 669. About 17 percent of the population would fall into this category.
  10. Good credit scores would range between 670 and 739. 24 percent of the population would be considered to have good credit.
  11. Very good credit scores would range from 740 to 799. About 23 percent of the American population falls into this range.
  12. Finally, Exceptional credit scores would be considered over 800. About 20 percent of the population falls into this category of people.

Article by Joe Peters

Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.

If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.