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Is Bad Credit Really That Bad?

In light of the recent changes in credit reporting, many Americans have been left wondering about the significance of their credit scores. A three-digit number does not give consumers enough of an idea about what their individual credit score actually means. Unfortunately, many credit-granting agencies only approve individuals with flawless credit records. So, what about the rest of us who don’t have flawless credit?

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Millions of Americans have fallen behind on paying their bills. In fact, most Americans, at one point or another, have been considered unattractive candidates for credit. Why, then, do most lenders and credit-granting companies only approve people with the very best credit when most people do not have pristine credit? The answer is not a very clear one. Naturally, companies want to provide credit for people who will be highly likely to use it responsibly, but the way in which the credit scoring system is structured does not take into account emergencies, divorce, illness, or any other common setback. There is no score for the responsible consumer who had a hard time, but is capable of returning to responsible consuming. This means that most Americans have average credit, but they cannot get approved for many lines of credit because they do not have perfect credit. This is the origination of the term “bad” credit. The best advice for consumers, regardless of their personal credit history, is to pay your bills on time each month. Credit scores change based upon your behavior, and just as a negative item will quickly affect your credit, responsibly paying your bills each month will allow your credit to improve significantly.

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Luckily, times are changing. The three largest credit-reporting agencies in the country recognized the need for a more accurate way of measuring credit, and they changed it. Now, consumers will be provided with a letter grade, A through F, that describes what kind of consumer that they are. Just like the grades in elementary school, an A represents excellent credit, a C represents average credit, and an F represents poor credit. While there are many potential difficulties with this new system of evaluating credit, it provides consumers with a more concise way of interpreting their personal credit scores. Consumers who once thought that they had “bad” credit are now given the peace of mind that comes from knowing that they are not bad people, nor are they bad consumers.

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