Every day, we are bombarded with loud advertisements telling you ways of attaining your score and offering services to improve it if it is unfavorable. What does this all mean? Where can you turn to get sound advice? Many do not know, but the federal government has agencies, bureaus and commissions to handle and address any issue, including consumer credit.
Although the FTC (Federal Trade Commission) is not mentioned in any of those ads, it does provide the most comprehensive source of information to help you unravel the many mysteries associated with your credit score and the legitimate steps you can take to correct bad credit. Until you view all of the information the government has to offer, here are some helpful tidbits to get you going.
To be clear, it’s important to know that a credit score is really nothing more than a “statistical formula” that creditors come up with in order to “predict how creditworthy you are” and tend to associate a higher score with higher favorability. There is no set minimum number that determines bad credit. Each creditor has their own set of criteria to use as inputs into their statistical formula and an individual minimum score that is ideal. Under federal equal protection laws, this cannot incorporate anything unfair including race, gender and age.
The creditor gets this information from one of three nation-wide credit reporting agencies: TransUnion, Equifax and Experian. If you are ever denied: employment, a certain financing rate or a service (maybe from a phone provider), you have the right to ask why under federal law, the Federal Credit Reporting Act (FCRA). The credit reporting agencies can only tell you what is on your report. The creditor that you filled an application for has to tell you specific reasons why you were denied. Vague or general reasons do not justify a denial.
Under federal law, you are given the right to request a copy of your personal credit report by the three nation-wide reporting agencies, free of charge. Among the many websites that are available for this service, only one is authorized and recommended by the government, annualcreditreport.com. The information incorporated in the report is the exact same information that creditors use in order to determine your credit score, so improving your score is a matter of improving your report.
If any information is false, do not fret. There is a process that you can go through to correct errors that pose little to no individual cost. Even if there is true information that is negative on your report, always remember that this is not permanent. The FTC provides resources for state-by-state credit counselors who will meet with you and discuss the legitimate ways of improving your individual credit. In most cases, it just takes time and sticking to a budget.
Taking the quick fix and hiring a quick consolidation company in hopes of improving your credit can often leave you even more in debt. If you do choose to go with a company such as this, remember under federal law, you are not required to pay a penny until all services are complete. When and if a company asks for any contribution in order for them to do something, they are doing this illegally.
Remember, poor credit does not have to keep you down. You can get your head above water, as long as you take the right steps and continue to be proactive. One bad time in your life does not have to define your credibility. You must know your rights and look beyond the media to fully understand the legitimate options that are available to you.