Bad Credit: How Will It Define You? |
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When an individual has 'bad credit' it can define them, where creditors are concerned, for a sentence of 7 to 10 years (depending on the type of record on the credit report). During this time, bad credit can hinder certain goals -- such as renting an apartment, buying a home, or purchasing/leasing a vehicle -- at a time when they may be vital to your life. So, what defines 'bad credit'? Bad credit is most commonly referred to those who are on the lowest end on the FICO scale (usually under a FICO score of 650). It can be argued, however, that bad credit can extend to any situation in which you are denied a loan or extension of credit. As a matter of fact, in the eyes of a lender or creditor, you may be deemed a 'credit risk' and not even know it. There are two main ways that a consumer can have bad credit and not even know it. Bad Credit Due to Identity Theft Identity theft is a growing problem that can damage your credit report and cause you to have bad credit. If caught early, you can alert the creditor that issued the fraudulent account(s), get them cancelled before too much damage is done, and have your own credit cards reissued with different account numbers. If not caught early, it can take years of disputes, court battles, and valuable time to get your report 'clean' again. Sometimes people who thought they had good credit can find out, through a credit denial, that someone else has used their information to rack up thousands in debt, which has then been charged off by the original creditors and sold to collection agencies, causing bad credit. Bad Credit Due to Reporting Inaccuracies Collection agencies and other creditors have the ability to monitor your credit report if they hold a debt that they believe to be yours -- even if it is not. They can also place it on your report even if it is not yours and the credit agencies will then make you dispute it in order to get it removed. These types of inaccuracies can cause you to have bad credit. Credit reporting agencies have been reported to have up to a 70% inaccuracy rate. A estimated 30% of those inaccuracies are detrimental enough to your credit report to lead to a label of 'bad credit' and credit denials. If all of this is scary to you, it should be. It means that ANY responsible consumer can be denied a mortgage, loan, or credit card due to bad credit. Can these inaccuracies be disputed? Yes. However, each dispute can take 30 to 45 days and it may take several disputes before a credit reporting agency complies and takes the account off of your report. That can mean months of living with bad credit. The kicker? Most consumers never even realize that they have been unjustly labeled with bad credit because they do not check their credit reports on a regular basis. Bad Credit by Daniel Wesley |
