Bad Credit Doesn’t Really Reflect a Client’s Responsibility

Credit reporting industries believe that an individual’s credit status reveals his personality, most especially his sense of responsibility. However, the New York Times and the Columbus Dispatch, two renowned newspapers are arguing otherwise.

Recently, New York Times studied how destructive medical bills are to people’s credits. Columbus Dispatch on the other hand, has been focusing their time in investigating how frequent credit errors occur on reports and how difficult it is to have them corrected.

In fact after a year of intense investigation, the team gathered and analyzed about 30,000 of the complaints that consumers filed in the Federal Trade Commission office. Many lawyers in 24 different states held cases against credit unions for their breach in the Fair Reporting Act. Among these credit unions in the United States are the Equifax, Experian and TransUnion.

According to reports from observers, the study that the Columbus Dispatch conducted on the protests against credit-reporting companies was the most inclusive one ever done.

Some of the errors that were documented include errors on personal information such as birth dates, names, and age. In fact, most of the complaints include mistakes in the customer’s transactions in car mortgages, credit card loans, and approved bank sales for foreclosures, paid-off automobile loans that were mistakenly recorded as repossessed and paid-off credit cards that were reported as delinquent.

The sad thing is, even if many of this information are just minor errors, credit unions seem to be powerless in changing them. This makes it very difficult for clients to have their records fixed.

However, not only errors in records can cause bad credit for customers. Medical necessities also play a vital role in the area. According to the New York Times, since most of the earnings of medical producers come from patients, many hospitals and doctors are billing debts to clients, and these debts can be overwhelming.

According to FICO, it isn’t surprising for someone with a spotless credit to fall into bad credit since medical-related debts and collections from credit agencies have equally damaging effects on a person’s credit standing.

But this can be remedied with a good policy for medical related appointments. New York Times suggest that an act for Medical Debt Responsibility and the Affordable Care Act could help in the financial needs of Americans.

Credit Card Options for Those with Bad Credit

Many credit scores by customers have suffered because of their bad credit history, especially if they have once filed a Chapter 7 or a Chapter 13 bankruptcy or have several unpaid debts still intact. But this does not mark the end for you. If you are suffering from financial crisis, getting back on your feet may be possible with a secure credit card.

CNN has recently released a full list of the best cards that are offered especially for people with bad credit background, but here are the three that stands out for those who want to rehabilitate their credit record fast:

The Secured MasterCard offered by Capital One

Though a yearly fee of $29 dollars would be charged to avail this card, it has a feature that enables clients to have control over their cash deposits. Furthermore, the higher your deposit is the higher credit you get back. Example, a customer can get as much as $200 in credit for repaying a $49 loan. You can get up to $3,000 in credit for maximum a deposit that is very good for your APR that comes with it which is very good for a secured credit card.

The Orchard Bank’s HSBC cards

Clients will be offered one among three different cards depending on their credit records. An Unsecured credit card comes with yearly dues of $39 to $59 and APR reaching from 14.99% up to 24.99%. The secured credit card on the other hand, imposes a $200 minimum in deposits and a yearly fee of $35 with a low 7.99% APR.

The USAA Secured Credit Card

This can only be acquired with persons who are members of the military troops and their relatives. It imposes a $250 minimal cash deposit. Not only that, you will be given a CD by the company for two years which would make you earn from your money deposits,

Another Chance for Clients with Bad Credit

Who says bad credit cannot get you the credit card deal you need? More credit card companies are providing the loans subprime clients need, however these are all for a huge price.

According to Equifax more financial intermediaries are lending to customers with credit scores that are lower than 660. In fact, the ratio of these lending increased to 41% in 2011 with banks spending almost 1.1 million for loans for subprime borrowers.

However, there were new regulations that were imposed for the transactions with clients with low credit scores. One of these is the increase in credit limit for the clients by 55% from the previous years to last year.

According to Credit.com’s Beverly Harzog, it was more difficult for people with bad credit to get loans last year, but now that financial institutions are starting to ease up, and are realizing that they need to expand their businesses in order to get higher profit they gave subprime lending another shot.

But the generosity that banks and other credit lending institutions are offering to clients with not-so-good credit comes with a bigger price. Not only are the terms strict and sometimes unfavorable for the clients, the interest rates that the banks impose are also very high.

It is wise to always put in mind that the lower your credit score is, the higher credit interest rates would be offered to you.However, to save consumers some slack, here is one credit card that offers decent deals for subprime lenders.

The First Premier credit card, this is especially created for clients with low credit scores and it charges about $200 annually, and has a 36% APR. Experts’ advice to clients is to read the terms and conditions first before getting credit cards. This is to prevent you from falling into the trap of institutions that charge fees that are too high for you.For clients with really bad credit, a secured credit card is the best option for you.

Many people find it difficult to manage their financial needs due to recessions and unexpected events like an emergency, a divorce, hospitalizations and many more. This leads them to fall into bad credit. Those with bad credit and wish to get out of that state can get a secured credit card from Orchard Bank.

This card will make clients deposit a minimum of $200, the APR is not high at 7.99% and the $35 yearly fee is not charged to consumers for the first year. Just the thing you need to get you back on track.

Credit Unions Assist People with No Credit

If you are aspiring to open a small business, for instance, landscaping, you will more likely need a loan. However, if you do not have any credit at all, going to a bank will be useless because they will not give you the loan.

In this case, a credit union will be your solution. It is the only financial institution that will be eager to help you develop a credit report. Unlike banks, they will have faith in you and appreciate your business plan.

Take for example Landscapes by Martin. It is already a successful local business and the owner was assisted by a credit union, Cornerstone.

However, Cornerstone Credit Union has reached its limit on the total of business loans they can give. This indicates they might not be able to help some of the aspiring small business owners, like that of Landscapes by Martin, if the Congress does not provide any form of assistance.

Both Senator Charles Grassley and Senator Tom Harkin are advised to vote for the Credit Union Small Business Jobs Bill. This bill aims to increase the lending limit so that more small businesses will be provided some kind of help by the credit unions.

Cornerstone, a small local credit union, is a reliable financial institution, owned by the locals, and it is also not-for-profit. It is located in Iowa and works together with small businesses to provide jobs for the locals.

According to the owner of Landscapes by Martin, because of the trust of Cornerstone, the small local landscaping business has been able to employ people, and the jobs they have are very important to them.

If the senators of Iowa vote for the Credit Union Small Business Jobs Bill, it will be a huge help to the small business owners. Moreover, increasing the lending limit is advantageous for the economy of Iowa.

Lenders Take Risks on Bad Credit Once Again

A lot of people would think that the country and its lending industry learned something positive from transactions with those who have poor credit, following the very gloomy recession in the years of 2008 to 2010, and also after the associated trend of foreclosures, repossessions, defaults and personal bankruptcies.

On the other hand, the opposite is taking place at this point in time.

A few of the major lenders are starting to return into making loans for borrowers with bad credit. These are different from the go-go years paving the way to the breakdown in 2008, when lenders would lend money to borrowers with poor credit, or in the situation of liar loans, zero credit at all. After everything that occurred, one does not necessarily have to be too scared to worry that, once initiated and considering the strong competitiveness of the lending industry, this trend will go faster.

Based on some reports coming from Equifax, one of the three credit reporting bureaus, 1.1 million worth of new credit cards was given by lender during the month of December in the previous year to those consumers with bad credit. There was an increase of more than 12 percent compared to December of the year 2010.

In addition, 23 percent of new car loans were made up of borrowers with bad credit for the fourth quarter in the previous year. There was an increase of 17 percent when compared with the fourth quarter of the year 2009.

Also, reports coming from Times state that car loans are being bundled and it earned roughly $11.7 billion in the previous year when it was sold as securities. There was an increase when compared to the sales of $2.17 billion in the year 2008.

This might be a warning to the country and its lending industry for another credit meltdown.