Credit Score Horror Stories- Why Credit Scores Matter

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When most people think of horror stories, they do not even consider the financial world as a possible scenario. But the financial world can be a scary place. Credit horror stories are a common occurrence and can happen to anyone. . Credit scores can be the perfect catalyst for a financial horror story.  Credit scores matter because they can give a person financial agency and freedom.

Why Credit Matters?

Some of you reading the horror scenarios below may not be worried. This may be because you do not know why credit scores matter, or how it can impact your life. Here are a few life scenarios, where credit matters:

  • Going to School- Many people look to funding for college. A person’s credit score can impact whether or not a person can find funding for going to school.
  • Buying/Renting a Place- When applying for a place to live, a landlord or a seller will probably ask for your credit score. Having a good credit score can make the difference between getting that dream place and having to look somewhere else.
  • Renting a CarCar renters look at a credit score to determine trustworthiness before letting a person rent a car.
  • Employment- Nowadays some employers check credit scores when hiring. Having a good credit score can make you a top candidate for a job.
  • Monthly Bills– Electric, phone, and other types of bill collectors check credit scores, and the ranking can play a role in determining how much the bill is every month.
  • Starting a Business- If a person is looking to start a business, then they will probably need funding, a low credit score will impact eligibility for that loan.

Things that Can Go Really Wrong In the World of Credit

If you are having a hard time picturing horrors in the credit world, imagine yourself in the following scenarios:

Identity Account Theft – Imagine being a financially responsible person and requesting a credit report. Once getting that credit report you realize that there are accounts that you did not open, loans taken out that you didn’t apply for, and a credit report that does not accurately reflect your financial activity. These could be mistakes or they could be signs of identity/account theft. Identity theft happens all the time and can impact more than just a credit score.

Changing the Debt to Credit Ratio- You find yourself at a good point with the debt and the amount of open credit that you have. You can see that this ratio is balanced and you worked hard to achieve that. Then all of a sudden a credit card lender decreases the amount of credit that they are offering, throwing off that perfectly curated debt to credit ratio. Once this ratio is thrown off, it can impact a person’s credit negatively. To make it even more horrendous, other creditors may follow suit by decreasing available credit, causing your open credit to debt ratio to plummet.

Cancelations of Cards- So you finally paid off your credit cards, awesome! As the responsible person you are, you promptly want to cancel that card to prevent further debt. You call your credit card company and ask to close the account. Everything feels good, even great UNTIL you realize that closing accounts can negatively impact a credit score. This is because it can impact your debt to credit ratio.

Spending without Knowing Limits from Lenders- You plan for a trip, and have relied on using a credit card to fund the expenses on it. Once you get to your destination, and are spending the budgeted amount, your card is declined. Declined! One of the most dreaded feelings out there. You are left confused, embarrassed, and more importantly, without funds. Sometimes lenders will decrease credit limits without properly notifying their customers.

How to Prevent These Credit Horror Stories

If you are trying to prevent from living out the aforementioned  horror scenarios, there are things that can be done:

  • Check Your Credit Report– A person can request their credit report from the three major credit bureaus. Keeping track of what is on a credit report is extremely important as it can show a person how they can go about improving their credit, and the report can show early signs of identity or account theft.
  • Keep in Touch With Creditors- It is a good idea to speak to creditors regularly and to know exactly how much funding is available. This is especially important if funding included plans abroad or long- term plans.
  • Maintain or Improve Credit– Here are a few steps a person can take to generally improve or maintain a good credit score:
    • Make payments on time
    • Don’t open unnecessary lines of credit
    • Refrain from closing credit accounts once paid off
    • Keep credit balances low
    • Budget!

A credit score matters because it affects many aspects of a person’s life from going to school to buying a house. The credit world, much like the rest of the world, can be a scary place. There are all sorts of horrors that can happen. Fortunately, there are ways to avoid becoming the main character in a credit horror story. The most important step a person can take to avoid credit horror is to check their credit report and check in with their credit lenders. If a person has a bad credit score, there are things they can do to improve it, while a person with a good credit score can take those same steps to maintain it.

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California loans are made or arranged pursuant to a California Financing Law License. See State Disclosures for additional disclosures.

1Loan approval is subject to meeting the lenders credit criteria, which may include providing acceptable property as collateral. Actual loan amount, term, and Annual Percentage Rate of the loan that a consumer qualifies for may vary by consumer. Loan proceeds are intended primarily for personal, family and household purposes. Minimum loan amounts vary by state. Consumers need to demonstrate ability to repay the loan.

2Based on consumers who received a loan from LoanMart from February 2002 to October 2018.

3Application processes could take five (5) minutes to complete. Upon completion, a conditional approval may be given pending review of documentation. Funding time is based on the time from final approval following receipt and review of all required documents and signing, prior to 2PM PST on a business day.

4To exercise the right to rescind, the consumer(s) must notify the lender in writing by midnight on the third calendar day from obtaining the loan. Within one business day from notice of rescission, the consumer(s) must return any monies received and fees paid on behalf of the consumer(s) by certified funds.

5Lenders recommend and encourage consumers to pay early and often and more in order to avoid additional finance charges.

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†All loan applications are subject to meeting Capital Community Bank’s credit criteria, which include providing acceptable property as collateral. Consumers need to demonstrate ability to repay the loan.

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