via Predatory lenders’ prey: People with poor credit, clarionledger.com
If your credit score number is 600 or below, much of the lending industry considers your credit “subprime.” Having poor credit can limit your access to better rates and whole classes of credit products and can make you vulnerable to being taken advantage of by unscrupulous lenders, warns a new report by the personal finance website Nerdwallet. Since many Mississippi consumers are carrying heavy debt, with credit scores on the low end of the spectrum, this could make them easy pickings for creditors looking to take advantage.
Nerdwallet issued the study this week, looking into the nation’s massive subprime credit market, and concluded the most-vulnerable consumers are often the least prepared to deal with slick presentations from subprime lenders. According to the report, 48 million Americans (about one in five) have less-than-stellar credit, making an attractive pool of business for unscrupulous companies. “Those consumers get unfavorable credit terms — when they can get credit at all,” reported Nerdwallet blogger Erin El Issa. “They may also pay higher insurance rates and can find their housing and job options limited.”
In addition, companies specializing in lending to subprime borrowers can be predatory, with fees and structures targeting less-educated Americans, and generally costing them much more. When you contrast that with the smorgasbord of options available to Americans with higher incomes and better credit scores, the difference is obvious. “There’s a big difference between a credit score of 600 and 800,” noted Nerdwallet credit card specialist Sean McQuay. “Consumers with excellent credit have access to the best loan terms and lowest insurance rates, as well as the most options. It’s the difference of thousands of dollars in interest fees per year. It’s the difference between being able to take the job you want and the one you have to settle for because you don’t have the available credit to cover your bills in the meantime.”
We’ve written many times before in this column about credit scores and how they can affect your ability to buy a car or house, get approved for emergency loans, and even get a job. But it bears repeating: regardless of whether your credit score is fair or accurately describes whether you are reliable or not, it’s a fact of life and could have a big impact on your future.
Here are a few key things to remember when considering your credit score:
Keep debt low. It’s not always easy to do this, especially when costs of living often outpace salaries. Keeping your debt at a low level can not only give you more to spend on necessities, it can help put you in a better position when shopping for credit. But it’s also important to remember that having zero debt generally hurts — not helps — your credit score. When it comes to your credit score, credit is like a muscle that needs exercise within reason. Buying something on credit every once in a while (never borrow more than you can afford to pay at once if you have to) is a recommended strategy.
Be careful about applying for credit. Applying for too much credit, or applying too often, can hurt your score, because consumers who are deep in debt are likely to be looking for new sources of credit to get them out of the hole they’re in. Credit scoring looks harshly at a consumer with too many applications.
Make your payments on time. This is the easiest advice to consider, but is often hard for people in debt to handle. But establishing good credit habits is a plus on your credit record.
Think before you close unused accounts. You’ve paid off that credit card? Awesome! But if you close the account, it could affect the delicate ratio between the amount of credit you have available to you and the amount you’re actually using. This is called “utilization,” and it’s a big factor in your score. So, before you decide to close the account, consider keeping it open for a while. And, if it’s just a little too tempting to use that card, cut it up, but keep the account open.
For more on the study and Nerdwallet’s findings, visithttps://www.nerdwallet.com/blog/credit-card-data/consumer-credit-card-trends-study/.