5 common credit gripes

The road to a great credit score may look complicated, but there are ways to overcome common credit gripes.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print

There's no doubt about it: The credit scoring system we use in the United States is complicated. What's more, there are plenty of critics who claim that it's downright unfair.

While it's true that our credit reporting procedures could probably use some reforms, there are ways to get past common credit gripes. Take a look at the five listed here, plus our tips for working within the system we've got.

1. I have to get into debt to build credit

People who prefer to pay cash often complain that there's no way to build credit without getting into debt. This comes from a kernel of truth: You do have to use credit to create a credit history.

But this doesn't necessarily mean you have to take on debt. For example, if you use a credit card regularly and pay your balance in full every month, you're building credit but not getting into debt. Consider this option as an alternative to taking out a loan that you don't really want or need.

2. Every little mistake is used against me

If your lenders are reporting your payment information to the three major credit bureaus, and most do, you might feel like they're tattling on you for every little mistake you make. It's true that foul-ups like missed payments, taking on too much debt, and submitting too many credit applications will get back to the credit bureaus and affect your score.

But it's important to remember that you can avoid many of these mistakes. For example, setting up text and email alerts so that you know when your bills are due or if your credit card balance is getting too high will go a long way toward preventing a gaffe.

And even if something does go wrong, a money misstep won't stay on your credit report forever. Most negative marks drop off after seven years; if you're making smart credit moves in that time, your score will recover. In short, there are lots of opportunities to avoid most mistakes and bounce back from the ones you can't.

3. My savings aren't factored into my score

Many people are frustrated to learn that some of their good financial habits, such as saving, aren't incorporated into their credit scores. If you excel in this area, feeling a little slighted is normal.

Remember, though, that the purpose of the credit scoring system is to assess borrower risk. Lenders want to know how likely it is that you'll repay money they've credited you, not how likely it is that you'll save.

Look at working on your credit score as an opportunity to highlight another side of your financial responsibility. Again, pay special attention to paying your bills on time and staying out of credit card debt. These two habits alone will help your score sparkle.

4. Credit reports are full of errors

Although lenders and the three major credit bureaus make efforts to create an accurate report of your credit-related behaviors, mistakes do happen. In fact, a 2013 study by the Federal Trade Commission found that one in five Americans has an error on at least one of his or her three credit reports.

The best way to cope with this gripe is to review your credit reports carefully at least once per year and take steps to correct mistakes if you find them. And the good news is that getting an error fixed is expected to get easier soon, because of new rules set out by the Consumer Financial Protection Bureau.

5. It's not clear how my score is determined

Historically, the credit reporting agencies were secretive about how your credit score was determined. While some information is still proprietary, we have a much clearer picture these days of what determines our scores:

  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • Mix of accounts: 10%
  • New credit inquiries: 10%

Again, the two most powerful things you can do for your credit score are paying your bills on time and staying out of credit card debt. But if you want to know more about your credit report and credit score, the Nerds have lots of great resources. Be sure to check them out!

Topics:
  • Credit
  • Credit
  • Credit
  • Credit
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print
This article was written by Lindsay Konsko from Nerdwallet/The Motley Fool and was licensed as an article reprint. Article copyright July 20, 2014 by Nerdwallet/The Motley Fool.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third party provider of the reprint permission and Fidelity Investments are independent entities and not legally affiliated.
The images, graphs, tools, and videos are for illustrative purposes only.
Fidelity Brokerage Services Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
720666.1.0
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.

Here's what we suggest you explore next

Is a 700 credit score the magic number?

Credit scores are incredibly important to maintaining your personal finance. This article discusses the possibility of finding the perfect credit score.

2% cash back on everyday purchases1

Deposit your cash rewards into an eligible Fidelity account. No annual fees.

You might also like

Is a 700 credit score the magic number?

Credit scores are incredibly important to maintaining your personal finance. This article discusses the possibility of finding the perfect credit score.

The most effective way to pay off debt

Paying off debt can be done in a streamlined and effective manner. This article explores the best ways for you to pay off your debt.

7 shocking ways you could be hurting your credit score

Most are aware of the financial benefits associated with maintaining good credit, but few are aware of these little known ways that you could be accidentally hurting your credit score.

2% cash back on everyday purchases1

Deposit your cash rewards into an eligible Fidelity account. No annual fees.