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%!”.
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.
