Credit Mistakes – 68% of Americans Make Them

Are you an American resident under 30 years old? If so, chances are you’ve made at least one major credit blunder, or credit mistakes that could haunt you for a while and make it difficult to get a low interest rate or even approved for credit at all.

That’s right, according to a recent survey conducted by Credit Karma, some 68 percent of all Americans have at least one negative mark on their credit report. According to the survey, such marks often include maxing out a credit card, late payments, defaulting on a loan or having an account sent to collections. About three out of every four respondents stated that they believed the credit mistakes had a negative impact on their life.

Needless to say, but the more severe the blunder, the more it will impact your credit. What’s more is that such penalties can stay on your credit report for up to 10 years.

Avoiding a Credit Disaster

While it makes sense that a younger age demographic would experience more credit mishaps than a more experienced one (live and learn, right?), the Credit Karma survey concluded that the best way to avoid a credit disaster among these youngsters is to be properly educated about the importance of your credit score, as well as how to manage personal finances. Bottom line: before you get that first credit card, know the importance of your credit score and the responsibilities associated with properly managing your finances.

Repairing Credit

If you’re among the 68 percent of Americans that did some damage to your credit score before you were 30 and are still paying the price, here’s a look at how to get that credit score repaired and back into shape:

Get under 30 percent: Always strive to have your debt-to-credit allotment under 30 percent. For instance, if your credit limit is $10,000, try to keep the balance at or below $3,000 for the best possible credit score.
Pay down debt: Always pay down the high-interest accounts first, as you’ll not only work toward a no balance account, but also save money in the long-term.
Make payments on time: This is perhaps the easiest way to up your credit score, yet it’s one that people struggle with. The bottom line is that late payments can greatly impact your score, so do what you need to do (schedule auto payments, set phone alerts, etc.) to remind you when bills are due.
Get a secured credit card: These cards require cardholders to put up “collateral” to obtain a credit line. They’re a great way to build credit and eventually can be helpful in the desire to apply for an additional, standard credit card.

Best Credit Scores – Top 10 Cities

It’s no secret that your credit score is the lifeblood of financial potential, at least when it comes to borrowing money. And it might not surprise you to learn that credit scores are often reflective of where you live. For instance, communities with high-income, well-educated professionals are more likely to have higher average credit scores than those to the contrary.

Certainly, there’s a lot more that dictates a credit score, and living in the aforementioned areas doesn’t guarantee you’ll have a great score, but we thought it would be fun to take a moment to examine the top 10 cities in America with the best credit scores, according to CBS Money Works:

Top 10 Cities with the Best Credit Scores

10. San Mateo, CA: With a score of 708, this northern California city close to San Francisco meets the “high income” criteria often associated with better credit scores. Credit repair consultants may not have a lot of business out in the Bay area.

9. San Ramon, CA: Another suburban San Francisco city, the average score in San Ramon is a solid 709.

8. Davis, CA: It must be something about California and high credit scores. Davis, a northern California city near Sacramento, has a 710 average credit score.

7. Arlington, VA: With a plethora of federal agencies and big businesses, most residents of Arlington, Virginia are well educated. That helps explain the 714 average credit score.

6. Redmond, WA: Redmond isn’t Silicon Valley, but it is a big tech town with an educated population. Hence its 715 average score.

5. Bellevue, WA: With median home values of over $660,000, this suburb of Seattle requires a good credit score and high income level for home ownership. That’s where the 716 average score comes to play.

4. Sunnyvale, CA: Back to California we go for No. 4 on this list, which has an average credit score of 719. Like others on this list, Sunnyvale is another big tech town with a well-educated population.

3. Cambridge, MA: It’s probably a good bet that the city that plays host to Harvard and MIT would have pretty financially savvy residents. It does – the average credit score is a cool 725.

2. Mountain View, CA: And we’re back in California for the runner-up, as Mountain View clocks in with an average score of a whopping 741. It’s another big tech city, but we’re starting to think there’s something in the water out there in Cali. Either that or people are just really responsible with their finances.

1. Cupertino, CA: We stay in California for the city with the best credit score, as Cupertino takes it with an average 742 mark. Another big tech city, Cupertino is perhaps best known as the home of Apple.

Inaccurate Credit Reports – $13 Million in Fines

Inaccurate Credit ReportsIt’s commonplace for many employers to pull background checks on job applicants to view things like credit history, criminal history and other factors that can better help them to determine potential risk during the hiring process. Employers who don’t pull background checks based on company policy might even do so with the candidate’s permission.

But what happens when the background check firms report faulty information to employers?

That’s been the case recently, as General Information Services and Backgroundchecks.com, two of the biggest background check firms in the country, were ordered to pay a $10.5 million fine to consumers for selling inaccurate background checks. The fine was ordered by the Consumer Financial Protection Bureau (CFPB), which also ordered the two background check firms to pay an additional $2.5 million civil penalty for failure to verify the accuracy of the reports that were sold.

The two companies sell about 10 million background reports each year to employers. And many of the inaccuracies on the reports that they are now being held accountable for weren’t exactly minor errors – they were major ones. Things like including judgments that were older than seven years, misdemeanor crimes being reported as felonies and criminal record mix ups between consumers with similar names were just a few of the issues that were reported. Affected consumers are believed to be receiving about $1,000 each from the issues fines.

It’s a bad look for the background check companies – and it brings about the question of just whether background checks for employment purposes are really worth it or not. That’s because the biggest loser in this entire background check debacle is the millions of people that were likely passed up for a job.

Know Your Credit Report

As we made mention of earlier in this piece, the practice of background checks for employment screening purposes is one that’s been the subject of much debate. However, in most cases, the potential employer makes it very clear what the company policy is in this regard during the interview process. On this note, it’s worth noting that you should be checking your credit report on at least an annual basis, especially if you expect to be looking for a new job soon. That’s because inaccuracies are common on credit reports and checking your report will give you time to sniff out and dispute errors.

Additionally, if your credit isn’t exactly up to snuff, knowing what your score is and how you might be perceived will allow you to better proactively address and clear up any issues with your would-be employer.

You can receive a free credit report once per year, and you can receive a complimentary credit summary once per month from many reputable credit report consumer websites.

Credit Tips – That Aren’t As Useful As You Thought

It seems like everyone has advice for how to improve your credit score. But it should go without saying that not all of this advice is good advice. In fact, some of the suggestions that people have are more likely to hurt than help your credit score. Needless to say, there’s a lot of misconception out there about the best ways to up your score. Here’s a look at some of those tips that you should stay away from:

Credit Tips that Aren’t as Useful as you Thought

Lower credit limits: Some people think that simply asking for a lower credit limit can help reduce debt. While that’s true, you must also keep in mind that part of your FICO score is based on how much you owe compared to your credit allotment. For a good credit score, you need to keep debt at or below 30 percent of your total allotment. But if you lower your credit limit to $3,000 and max it out, it won’t do your score any good.

Pay off installment loans: Don’t focus too much on paying off installment loans early – it can actually drop your debt load – and possibly your available credit. Instead, focus on paying off credit cards.
Open lots of credit cards: To get more of a credit allotment and increase utilization ratio, many people think that opening up several new credit cards at once is the answer. It’s not – it can actually hurt your credit score due to the multitude of inquiries for new cards.
Settling debt: It’s always a good move to settle any outstanding debt with lenders, preferably for less than you owe. However, many people make the mistake of doing so and not ensuring that a written report is filed that states the debt was “paid in full.” Make sure all debts – even if they’re paid – aren’t listed as “settled.” It can hurt your score.
Pre-paid debit cards can help build credit: They can’t – they have nothing to do with helping you build your credit score. A secured credit card, however, can. This works similar to a debit card.
Never use your credit cards: Never using your credit cards can’t hurt your credit score, right? Wrong – part of your credit score is dependent upon credit history and knowing you’re making on-time payments, so you’ve got to use them. It’s better to charge small amounts and pay it off each month than to never use your credit cards.
Credit repair firms are helpful: While this is true for some firms, it’s not true for others. That’s because while there are a lot of qualified and credible credit repair firms out there, there are arguably just as many unethical ones that may attempt to repair your credit via identity theft or some other illegal manner. Beware!