March 25, 2023

OneCredit card usage soars amid inflation and high interest rates Between April and June, leaving credit users wondering what they can do to improve their credit score. Those still recovering from the pandemic and relying on credit are especially vulnerable as the threat of a recent recession pushes people to save and prepare for tough economic times.

“It’s been a huge problem since the start of COVID, where people are stuck at the point where they can’t pay their bills,” Jason Kaplan, president of credit repair company The Credit Pros, told TIME.

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A consumer price index that measures how expensive goods and services are Largest increase since 1981, the U.S. Department of Labor reports. Luxury purchases across the country have declined since the start of the pandemic. Just last month, Best Buy CEO Corrie Barry a statement On the decline in electronics sales.More and more credit users Pay for household goods and essentials with a credit cardrather than non-essentials or luxuries.

“Financial responsibility and budget orientation (hard) in an environment that requires funding and resources and a lack of education about the long-term, even short-term, impact of (low credit scores). These are all issues we have in this country. , and the problem is getting worse,” Kaplan said. “COVID-19 and inflation have exacerbated this, but it’s a cycle that happens every 15 to 20 years in this country.”

Why Your Credit Score Matters

Credit scores are a numerical system that can only predict how likely a person is to pay their bills on time within the next two years, but it affects many aspects of life, Kaplan said. A low credit score can limit a person’s ability to rent a house, apply for a mortgage, buy a car, buy insurance or even find a job.

“Your credit score is a completely mechanical process. There is a formula, and there are a limited number of factors that can affect your score. Overall, good credit is more important today than it was 10 years ago,” says credit repair company Sky Blue Credit President Jim Kemish told TIME. “That’s because as interest rates go up, you pay more for bad credit than you used to.”

Employers in certain fields are now looking at credit scores for job pre-screening, and if employers don’t like what they’re seeing — namely applicants with low credit report scores or late payments — it could affect a company, Kemish said. person’s credit score. Ability to obtain employment.

The use of credit is clearly part of American culture, and it is rooted in most aspects of society. Intertwined, however, is a lack of financial literacy, which disproportionately affects the economically disadvantaged, Kaplan explained. He added that legislation like the Credit Card Accountability and Disclosure (CARD) Act of 2009, which reduces predatory lending by regulating fees, enhancing consumer disclosures and protecting young consumers, still has many loopholes that people need to be careful of.

“We’re in an economic environment in the U.S. where people typically get stuff before they can pay. Buy now, pay later. On the bright side, it’s a way for the U.S. to become one of the world’s leading economies, and everyone There seem to be opportunities to borrow, invest and grow,” Kaplan said. “There are positives and there are negatives.”

How to Improve Your Credit Score

Both experts recommend techniques people can use to improve and maintain a high credit score, including paying bills on time — especially when collecting money — aiming to only use 20-30% of their credit limit and checking them regularly credit report.

“The largest part of your credit score, about 35 percent, is your payment history. My number one advice is to always pay your bills on time,” Kaplan said. “It doesn’t mean paying the full bill. You can pay the minimum amount with a credit card or even the service.”

Kaplan also said it was crucial to have a comprehensive credit portfolio for different purposes.

“The idea is that if you have the right credit portfolio, credit cards, mortgages, car payments, bank loans, all of which (implied) you’re a refined, successful adult living the right life, in terms of credit score … you have less risk because you are involved with all these institutions,” Kaplan said.

Some consumers are concerned that checking your credit score could have negative effects, but Kaplan explained that consumers can pull their scores at will, also known as soft inquiries. However, when a third party company pulls a consumer’s score, it’s a tough query, and a lot of hard queries in a limited time can lower your score, so don’t shop around too often for a loan or a new line of credit. One point is important.

It’s also important to check your credit report frequently to make sure there aren’t any errors, as they are far more common than people think.

“Get all three credit reports. Proofread them carefully. If you’re confused, hire a credit repair company to help you understand what you’re looking at,” says Kemish. “Look for errors. Errors can be very expensive to your score. If you find something that doesn’t belong to you, if you find an old paid account that is still reporting a balance, you have to dispute it. If you ever have Receipt, don’t trust the recipient to report it as paid. You have to keep an eye on your credit report.”

If you have a bill to collect, paying it is critical, but you can try to negotiate a lower price on the bill, especially if it’s an old bill that dates back several years, Kemish said. Both experts stressed the importance of having an emergency fund for emergencies and trying to save a little each month, but acknowledged that this is not something everyone can do, and for those living on a paycheck or in debt. It’s much harder to say.

“Money in the bank is power. The ability to pay your bills on time, the ability to deal with emergencies that arise, the ability to know you can take time off without draining your credit balance,” Kemish said.

Everyone’s financial situation is different, and the most important thing is to pay attention to how you use your credit.

“It’s important for everyone to have empathy for their situation. No one should feel guilty about being behind,” Kemish said. “Try to make an informed decision, when it comes to your credit, the most important thing is to be aware of the connection between your credit score and your life. It’s easy to make the decision to take that piece of plastic out and buy you Anything you want and then suddenly cut off your ability to find a job and be successful.”

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