A recent article in the New York Times, reports that "about 26 million Americans lack a credit file." Ann Carrns continues by adding that these "credit invisible" consumers...lack any credit history with the major nationwide credit reporting agencies, which tends to shut them out of the economic mainstream. These findings are according to a report issued on May 5, 2015 by the Consumer Financial Protection Bureau.
"An additional 19 million Americans, or 8 percent of adults, have some credit history, but not enough to create a score. Eighty percent of adults, or about 189 million people, have credit scores."
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: Poor credit history and a bad credit score can have a serious impact of your life.
No one wants bad credit. Sometimes mistakes happen. Sometimes factors like medical bills, job loss and tragedy influence our financial profile in ways we never could have predicted. Bad credit can happen to anyone.
But now what?
If you’re wondering how to repair your credit score, you are not alone. The widespread decline in credit scores has been one of the side effects of the recession but this doesn’t mean that you can’t pro-actively take the steps to start repairing your credit.
Factors that Damage Credit
First let’s clarify what can lower your credit score and damage your credit profile.
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- Excessive Debt: If your credit cards are maxed and you have several loans, your debt profile is probably contributing to your low score
- Late Payments: The credit bureaus note any 30, 60, 90 & 120 day payment lates. It is essential that you pay your bills on time.
- Dormant Credit: A dormant credit card is an account that has infrequent or no use. In some cases, if an account has no activity for a period of time, issuers may close the account which revokes future charging privileges. Dormant accounts may not have additional debt but they also don’t help your credit score.
- Collections: If you fail to make a payment or pay off your account – the creditor may send your account to collections. This severely affects your score. Make sure to work closely with your mortgage or credit professional regarding paying off collections. Note: Collections on federal loans such as student loans will prevent you from getting financing from most (if not all) lenders.
Everyone will tell you that there are financial benefits to owning a home but it’s important not to forget other positive reasons that have nothing to do with money.
1 – Security
If you’ve been a renter before, you know that your ‘rights’ are limited and many times the possibility of moving rests on the whim of your landlord. When you buy a home
– it puts you in control. As long as you make your payments, you are the master of your castle and that security can help you sleep better at night.
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