How to avoid a bad credit score and understand how mistakes are made on your credit report, are things you should definitely know.
A high credit score is something a lot of people aspire to in today’s modern consumer-driven world. It is taken for granted, mistakenly, that today one cannot survive without the support of credit.
"Some debts are fun when you are acquiring them,
but none are fun when you set about retiring them."
- Ogden Nash, American Writer |
The regular use of credit and credit scores are directly related. Lenders have created a situation where availability of credit is related to the credit rating/score of the borrower.
They base this on logical and justifiable reasons. Mostly, as a way of managing their risk against losses. So the consumer wants to ensure that their credit rating is clean and if for some reason it is not and they have a bad credits score, they want to understand how they can correct errors and improve their score.
The truth is that lenders insist on a reasonably high credit score as it lessens the risk of them losing money on the loan. A high credit score borrower is one who does not fail to make his payments on time and is less susceptible to give the lender sleepless nights.
The lender is assured of a continued flow of interest income with less or no worries of losing the principal if he can avoid consumers with a bad credit score. One could argue that a borrower’s high credit score, in fact, goes on to favor the lender.
Unfortunately, the lure of getting easy credit at a relatively lower interest rate is something that is highly appealing to most people. Therefore, they spend a lot of time working to build their credit score, not realizing they are taking on more debt and creating a higher risk environment for themselves and their family.
While their attempt to service their loans and creditcards may be satisfactory enough to entitle them to a high credit score, they may still be subjected to a low credit rating on account of mistakes made on the credit report.
The issue of incorrect reports, causing a bad credit score, has been reported by countless borrowers who claim to have an excellent repayment history. Studies revealed that nearly one fourth of the credit reports today are plagued with errors of a serious nature. Such errors land many borrowers in a predicament, where his request for a loan for emergency surgery, educational expenses or a home at a bargain price is turned down.
All this stress and confusion caused solely by having a bad credit score due to mistakes that were made on a credit report.
There can be several reasons for mistakes appearing in credit reports. It may be that the application was made under a different name. For example, a single application may contain different names like Bob Allen or Robert Allen at different places.
There might have been a mistake in reading the name/address from a handwritten application, resulting in a clerical error in documentation. The same is true for the social security number.
Many times it happens that the payments made by you are mistakenly entered in someone else’s account. Or, information positively affecting your report is missing.
All of the above errors can lead to a bad credit report. So you should verify that no information is missing and the available information is accurate, up to date.
It is therefore of paramount importance to ensure that your credit report is accurate and free from mistakes. The only way that you can be absolutely sure of this is to review your credit report yourself, at least once every year.
"There is no comparison between that which is lost by not succeeding,
and that which is lost by not trying."
- Francis Bacon |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
