Credit scores, for better or for worse, are used in America to help determine someone’s creditworthiness. This affects all sorts of things from home loans to car loans to rental applications.
Your credit score is used by lenders looking to know more about your financial wellbeing. These credit scores take into account the types of credit you have, the payments that you make, the age of your accounts, what kind of accounts they are, and more.
If you have good credit, you’ll be able to do things like get better car insurance or find a solid rental pretty easily. But if you have bad credit, those things suddenly become a lot harder.
It’s easy to beat yourself up over bad credit, especially since credit scores are so important in America. But try to separate yourself from this line of thinking. It isn’t benefiting anyone and it’s only harming you in the process.
Instead, center yourself. We made bad choices, or things that happened outside of our control, and while we’re not completely at fault for what happened, we are responsible for fixing our situation. Framing things like poor credit scores in this way allows us to detach from some of the shame surrounding bad credit and will empower us to fix our credit.
Bad credit tends to haunt people. Not only does it make qualifying for loans harder, but bad credit has further-reaching consequences than people realize.
With most credit scoring models, credit scores range from 300 to 850. 300 is the lowest score you can have and 850 is the highest score that you can have. If you have a score below 580, you’re generally considered to have a very poor credit score.
Poor credit scores restrict access to loans and leave you prey to credit repair schemes. If someone is trying to sell you a product that will suddenly help your credit score go from very poor to excellent, run in the other direction.
There are tools that can help you build your credit, but a credit repair journey is going to take anywhere from six months to several years.
While it can feel shameful to have bad credit, I want you to check that attitude at the door. Your credit score does not reflect your morality in any way shape or form. Plenty of responsible people have bad credit scores because of life circumstances. And even if you were once financially irresponsible and that’s how you got into your bad score, you’re looking for help. And that shows how amazing your character is that you’re willing to take this journey.
Plenty of situations can cause your credit score to plummet. You can run into some mental health struggles and spend money without knowing how to control yourself. You can get into medical debt, and not be able to pay it, so it’s sent to collections. If you miss any payments on your accounts, that’s a ding to your credit.
Unfortunately, it’s fairly easy for your credit to slip, but it’s incredibly difficult to build your credit again. And that can feel like an insurmountable feat when you’re starting in the very poor credit range. However, it’s not impossible and many people have gone from bad credit to good enough credit to buy a home.
You don’t suddenly wind up with bad credit overnight. It takes time for bad credit to accumulate, even if it’s happening mostly behind the scenes. There are five main categories that affect your credit score.
While credit scores are theoretically objective, there are outside circumstances that might make it easier for one person to have a good credit score than another. Although credit scores do not consider one’s income, a study done by the Consumer Financial Protection Bureau concluded that those in lower economic classes tend to have lower credit scores while those from a higher socioeconomic status tend to have higher credit scores. Equal credit opportunity is unfortunately not a reality.
Even at the start of their financial journeys, those who live in lower socioeconomic demographics face more challenges than those born into privilege. It’s exceptionally important that if you come from a lower-income background, you do not beat yourself up about having a lower credit score. The odds are statistically not in your favor, and the system favors those who already know how to get ahead, creating more financial inequality.
More affluent individuals have better access to resources to improve their credit. They can be added as authorized users on accounts and their parents are generally more knowledgeable about how the system works.
Additionally, low-income individuals are preyed upon by predatory lending companies because they tend to have poor credit or no credit. And these types of businesses often cause severe harm to people’s credit.
Bad credit isn’t something that you want to ignore. When you ignore it, the problem worsens into a bit of a monster. And it doesn’t just affect your ability to purchase things using credit. Bad credit has far-reaching consequences.
If your credit score isn’t the best, it can be tempting to look at credit score alternatives. However, many “alternatives” to credit scores are dangerous and could make your credit journey more difficult. You want to avoid both Employer Identification Number (EIN) schemes and credit protection number (CPN) scams. These problematic “solutions” can actually damage your credit score further and make it harder for you to do things like rent a home or purchase a vehicle.
Some people promise that you can connect your credit history to your Employer Identification Number instead of your Social Security Number. However, this is not the case, according to Experian.
If someone is promising to wipe out your credit score and replace it with a higher one using your EIN, you need to run the other way. They’re trying to scam you.
Another common scam is known as a credit protection number or credit privacy number. Credit repair companies that offer these are essentially offering a fake Social Security Number. But they’re not harmless. These numbers are often stolen from the young, elderly, and incarcerated. If you have a CPN, you’re committing fraud, which is illegal. If a credit repair company offers this as a solution, you need to run.
So, you’ve fallen for a CPN or EIN scam, and you’re not sure what to do next. Don’t shame yourself. You don’t know what you don’t know, and plenty of people have fallen for the same scam. It isn’t your fault, but it is your responsibility. And there are several avenues that you can take to protect yourself from prosecution.
First, report the organization to your state attorney general. They’ll be able to do something about the organization and keep other people from falling for the same scam.
Next, file a complaint with the Better Business Bureau and the Federal Trade Commission. Again, they’ll be able to take further action against the company to prevent more people from harm.
Finally, you can seek legal action by consulting an attorney.
Whatever you do, don’t ignore the situation. This action will only make things worse for yourself. And your credit score is very important. You don’t want a lack of action to hinder you from living your best financial life.
While EINs and CPNs are scams, there are very legitimate things that you can do to improve your credit score.
Credit scores are essential to American life. They let companies know if they should lend you money, let you rent, or give you better rates on your car insurance. While there are many promises to get you a better credit score quickly, some are scams that you should avoid. Instead, you should follow our seven tips to raise your credit score.