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Credit Factors and Mistakes – The American Perspective

TThe following information was taken from an interview with Ricki Lowitz, former fellow of the Urban Institute in Washington, DC, and executive director of Working Credit, a nonprofit organization that offers credit counseling and training in seven states.

FAULT: Medical collections do not hurt your credit score like other collections do.

MADE: While that changes with FICO 9, a new credit scoring model, Top Used Credit Scores continue to count medical collections against your score, just like any other collection.

FAULT:No credit score is better than a bad credit history.

MADE: The absence of a credit score is just as damaging as a bad credit score.

“If you don’t have a score,” Lowitz said, “it’s like having a terrible score because every time you have to do something like borrow money, you’ll pay the highest interest rates. bred for everything. “

FAULT: You have to pay a credit repair company to repair your credit.

MADE: You can take steps, like disputing a mistake, to improve your credit on your own for free, or you can get free help from nonprofits that specialize in helping people improve their credit.

FAULT:You can’t have a decent credit score without first paying off all of your collections.

MADE: Even if you have collections, you can get a good credit score in 6 to 12 months just by setting up one or two lines of credit and managing them well.

FAULT:It’s best to pay off your collections before trying to build a credit score.

MADE: “Even if you work like a demon and pay off your collections,” Lowitz said, “you still won’t be in the game because you still won’t have a credit score.”

FAULT: The only way to establish a credit score is to use a credit card.

MADE:Another good way to get a good credit score is to get a credit loan from a reputable company that keeps their interest rates low. These are secured loans. You take out the loan, but don’t take the proceeds up front. The proceeds remain in a locked savings account or CD. While you pay interest and maybe service charges, this loan is still a way to build credit. Once the loan is paid off, you get your money back.

FAULT: The larger the loan you take, the more your credit score increases.

MADE: “The effect of a $ 30 loan is the same as a $ 30,000 loan,” Lowitz said. “Every time you pay off debt on time, you get an ‘A’ on the test. All the credit scoring system cares about is, “Did you pay back what you owe like you said?” “

FAULT: It doesn’t matter if you miss a credit payment every now and then.

MADE: “The most important thing about the credit system,” Lowitz warned, “is that if you’re 30 days late on a credit card or loan payment even once, it can lower your score. from 100 to 125 points. “

FAULT: Payday loans, auto title loans, and purchase option rental leases, if properly managed, can help you build a credit score.

MADE: These types of products usually don’t get reported to major consumer credit bureaus unless you don’t pay for them.

FAULT: The poor pay more for everything.

MADE: In fact, according to Lowitz, bad credit – or the lack of credit – is what increases the costs of low-income people, as these factors force them to pay absurdly high interest rates.

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