This is just a response to reallybadcredit on Twitter. The tweet was actually aimed at someone else, but I felt rather compelled to respond to this statement. Bad credit should not be illegal, per se. The issuance of credit in aims to malafactor the recipient should be made illegal. A lot of people I know are actually responsible with their credit cards and have excellent scores and some people I know cannot even touch a card for seven years.
Let's analyze the two: one person is responsible and is mature with their credit. They have been educated on what comes from having bad credit and do everything in their power to advance their score. Kudos to them, but now let's talk about the other side. People who often have bad credit are often inexperienced with using a credit card. And there are companies that do not mind putting these people in debt due to a lack of education. It is not like they choose bad credit. American society is known for being the populace of debt Mainly it is due to the lack of financial education and here's why:
The average adult carries around two to three credit cards and do not leave those accountss open for more than six months. This is a sure fire way to damage your FICO credit score. They also do not dispute any bills and have companies like Chase talk them to the cleaners. Often in college, there will be recruiters that say, "Sign up for XYZ credit card and you'll get a free shirt. You can even through the card away afterwards". They often take advantage of people wanting free stuff. Also most people do not use online free credit score review sites like http://www.creditkarma.com/ . They are totally in the dark when suddenly they find out that 8 credit cards have been opened in his of her name. Also people who do not pay within 28 days are hit with hefty interest rates. How hefty? An "average score" credit card can charge a person up to 28% for a payment past the grace period. Is this truely fair? No. But they did sign that contract, so they are forced to grin and bear it. Often times, credit cards are written in legalese or financialese. Meaning, you you have to understand the jargon of finance and law in order to truely read between the lines. And there is a percentage of the population in America, that completely does not understand how to read. Illitaracy rates used to range around 70%. That's 3 in 10 Americans that do not understand either credit card or cell phone contracts.
That means that probably most people that are in the bad credit range are either a) there because of their own faults or b) do not understand their contracts whatsoever nor do they understand what methods can be used to research their credit. Credit Karma is a good site for Credit Reports and http://www.bankrate.com/ is good for researching interest rates and credit card rates as well as mortgage rates. But getting back to topic, the issuance of credit to an mal-educated populace should be made completely illegal. While I do not really advocate Socialism, I do see the need to provide increased credit card regulation in the United States. Creditors do not really consider the person's overall social stance nor literacy rate of the contractee.
Showing posts with label FICO score. Show all posts
Showing posts with label FICO score. Show all posts
Friday, September 24, 2010
Tuesday, April 20, 2010
Keeping Bills Paid On Time
Wow! Sounds like a easy thing to do right? If it was so easy I would not be writing this blog, now would I? Well maybe I still would to address some other point, but the most interesting thing happened to me two days ago. I could not pay my bill when I wanted to. I paid a little bit from last month because there was a serice charge of $1.35, but I could not pay for this month. I tried to call and pay again, but I could not. Turns out the internet providers have a ten day grace period from one bill to the next. In other words, I could not pay online or over the phone for this month even if I wanted to. I had to go in and take one to the hip. (I would rather pay the $2.00 than to damage my FICO score. Let's just put it tht way.) I went in and paid today.
Folks, not matter what fancy trick these companies use, do not let them force you to be late. It will damage your credit. All bills should be paid on time. Cell phone companies do not check credit scores when you sign up, but they will ding your score if you're late. All you need to do is just simply miss one payment and you'll see what I am talking about. But at the same time, do not try to totally automate your payments because they will take the money they need out at their convienance, not yours. This means that you will have to constantly check your account and do more accounting to make up for their ability to tap into your funds. Who knows, company XYZ might overdraw you if you are tight on funds.
The only exception to this rule usually comes from making mortgage payments. You can have those automated and can be sent to your account and then applied to your mortgage. And you can also set the date of withdrawal. This should probably be set to the middle of the month so you have the ability to pay the mortgage off with either payheck you get from your job or business.
Well why is it important to pay bills on time? This goes back to my last article about FICO scores. If you do not pay on time you will take hits left and right to your credit score card. Remember, these days a good credit score is 680-739 and excellent scores is 740 and above. If one wants to go in on real estate, they need a good to excellent standing with FICO. Again, this determines how long you have kept good credit and whether or not you are a good risk for a loan.
Folks, not matter what fancy trick these companies use, do not let them force you to be late. It will damage your credit. All bills should be paid on time. Cell phone companies do not check credit scores when you sign up, but they will ding your score if you're late. All you need to do is just simply miss one payment and you'll see what I am talking about. But at the same time, do not try to totally automate your payments because they will take the money they need out at their convienance, not yours. This means that you will have to constantly check your account and do more accounting to make up for their ability to tap into your funds. Who knows, company XYZ might overdraw you if you are tight on funds.
The only exception to this rule usually comes from making mortgage payments. You can have those automated and can be sent to your account and then applied to your mortgage. And you can also set the date of withdrawal. This should probably be set to the middle of the month so you have the ability to pay the mortgage off with either payheck you get from your job or business.
Well why is it important to pay bills on time? This goes back to my last article about FICO scores. If you do not pay on time you will take hits left and right to your credit score card. Remember, these days a good credit score is 680-739 and excellent scores is 740 and above. If one wants to go in on real estate, they need a good to excellent standing with FICO. Again, this determines how long you have kept good credit and whether or not you are a good risk for a loan.
The Consequences of Job Hopping
I do not how many people do this, but overall job hopping damages your credit score. Your FICO scorecard is ruined if you hop from job to job. Why do I say this? I know from other people who have been denied jobs and credit cards. The credit card companies along with the mobs and FICO consider you a risk when you go from job to job. So consultants out there have to sometimes dispute their score because of the per diem jobs they might obtain.
I realized this because of the fact that the scores of people who are denied credit have commonalities that Transfax, Experion and the other one looks at. They consider good credit risk to someone who has kept the same job for years, who lived in the same place for years, who pays their bills on time and who has never filed bankruptsy. Do only time I see job hopping as permissible is if you transition into one job to another smoothly, as in giving the proper two weeks notice and finding a higher paying, more stable job.
There are some high risk candidates besides consultants and job hoppers and those people are the self-employed. While I partially fall into this catagory, my primary source of income is from Sam's Club while secondary sources comes from investments. When employers check your employment history, some might also check your FICO score, hence the name background check. And while employers cannot disciminate against you for gender, ethnicity, or income bracket, they can disriminate against you for job hopping and having a low FICO score. Also mortgage companies hate to deal with you if you have not held a job for more than one year. They consider you to be irresponsible and unrulely. Such might not be the case, but job hopping is a high risk manuver. Even more so than stocks. You establish yourself with one company and then hop to another because they pay "better" and burn than bridge then have to re-enter probation for 90 days yet again. So remember that when you go from one $7.75/hr job to another $7.75/hr. job. The results can decimate your credit score.
Perhaps if you choose to do so, one should check with trying to obtain a grace period where the job hours do not overlap. That is what I did when I went from City of Reno to Sam's Club. The transition was fun and rewarding, but draining at the same time. While you make a lot of money, you lose a lot of time in exchange. But the city did not hold any animosity towards my departure. So I would actually reccomend this course of action if it is option to you.
I realized this because of the fact that the scores of people who are denied credit have commonalities that Transfax, Experion and the other one looks at. They consider good credit risk to someone who has kept the same job for years, who lived in the same place for years, who pays their bills on time and who has never filed bankruptsy. Do only time I see job hopping as permissible is if you transition into one job to another smoothly, as in giving the proper two weeks notice and finding a higher paying, more stable job.
There are some high risk candidates besides consultants and job hoppers and those people are the self-employed. While I partially fall into this catagory, my primary source of income is from Sam's Club while secondary sources comes from investments. When employers check your employment history, some might also check your FICO score, hence the name background check. And while employers cannot disciminate against you for gender, ethnicity, or income bracket, they can disriminate against you for job hopping and having a low FICO score. Also mortgage companies hate to deal with you if you have not held a job for more than one year. They consider you to be irresponsible and unrulely. Such might not be the case, but job hopping is a high risk manuver. Even more so than stocks. You establish yourself with one company and then hop to another because they pay "better" and burn than bridge then have to re-enter probation for 90 days yet again. So remember that when you go from one $7.75/hr job to another $7.75/hr. job. The results can decimate your credit score.
Perhaps if you choose to do so, one should check with trying to obtain a grace period where the job hours do not overlap. That is what I did when I went from City of Reno to Sam's Club. The transition was fun and rewarding, but draining at the same time. While you make a lot of money, you lose a lot of time in exchange. But the city did not hold any animosity towards my departure. So I would actually reccomend this course of action if it is option to you.
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