grAVIDy Magazine 2nd Quarter 2013-14 | Page 15

Credit Scores

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Credit Scores: What are they, and how are they impacting our country?

America is gradually becoming more of a caste system. There is a great disparity between the upper class and the lower class. Some may even question if there is a middle class anymore because the chance to move up from the lower class is almost non-existent. The opportunity for prosperity and success is relying more on a number and less on hard work. Credit scores impede a person with a low credit score from receiving loans to purchase a car or house. This shows how the person is stuck based on a social hierarchy. An individual with a low credit score should have the opportunity to build up their score regardless of past mistakes. Credit scores are the culprits making America more of a caste system.

Credit scores play an essential role in one’s needs and comforts. A credit score is a number given by credit reporting companies based on the trustworthiness of a person to repay a loan. It can affect you getting a lower rate for buying a car, house, or getting a student loan. According to Mike Anderson, author at nerdwallet.com, 5 years ago 620 was a good benchmark, then it went to 640, 680, 720, and now 740. Credit scores generally range between the low 300s and the mid-800s.The average credit score is around a 685. Also, there are a total of three scores because there are three different bureaus, Experian, Equifax, and TransUnion.

Some common factors that make up a credit score is your bill-paying history, number and type of accounts you have, how long your accounts have been open, recent credit activity, whether you have had debt collection, foreclosure, or bankruptcy and how old they are. According to the Consumer Financial Protection Bureau, the calculation of your credit score cannot use or take into account factors such as race or color, gender, national origin, or marital status. Many people do not realize that one big mistake in your past can affect your credit score for the future. A bankruptcy and foreclosure can haunt your credit score at least seven to ten years. Also late payments can bring it down; it will take good financial behavior and time in order for it to be forgotten.

Photo by http://www.myfico.com/crediteducation/whatsinyourscore.aspx