Whenever people receive the countless spam emails, and pieces of junk mail, making an offer of firm credit, they often wonder whether or not those firm offers of credit actually mean anything or not. This then leads them to wonder about the consequences if they opt out of these firm offers of credit: will it improve their credit scores? Will it hurt their credit scores? In order to accurately answer this question, people should first understand how credit reporting works and how credit repair works as well.
Credit Reporting
The three major credit reporting agencies in the United States are Equifax, Experian, and TransUnion. There are several smaller credit reporting bureaus, however these are referred to as “the big three.” They receive the most coverage, and these are the three primary institutions that decide what your credit report will be. They pull relevant information from all of your financial transactions as well as legal documents that may say whether or not you have had a bankruptcy or any other both legal and financial problems and they will collect, hold, and sell that information to financial institutions that legally can look at it.
These are different entities from the agencies that you bank with, although your banks and other institutions will communicate necessary information to the bureaus. It is illegal for the three bureaus themselves to exchange information; they only do so in the instance of a fraud report. If you believe that your information has been illegally shared or purchased, then dispute it with the financial agencies and possibly seek assistance from a personal financial advisor.
Some smaller agencies will do credit reporting on a much more specific portion of the population, hence why they are not one of “the big three.” Institutions may report on lower income individuals so that some agencies can be more knowledgeable about about those demographics. These smaller reporters are also more likely to only collect the parts of your information that they need for the scope of their report.
Credit Repair
Since you’re reading this article, then you are probably wondering ways that you can improve your credit. Repairing your credit can look different depending on your income, the damages done to your credit already, and the options available to you. It is important to note that whenever you receive any firm offer of credit that exists to help you improve your credit, you do not have to accept that offer in order to start repairing your damaged credit as soon as possible. Here are a few ways that you can repair your credit without taking any firm offers of credit:
Improve your credit utilization ratio on existing tradelines
One of the easiest ways to improve your credit is to change your credit utilization ratio. This means that you change the amount that you spend on a tradeline and make it a lower percentage of your tradeline’s limit. The ideal ratio is about five or six percent of the limit. If that is not sustainable for you and your accounts, then do not hesitate to get into contact with your credit card company and ask for a different limit. This process may take a while before you start to see results, however it is a tried and true method of credit repair that will also leave you with less monthly credit card debt, which is always nice.
Pay Bills on Time and In Full
This is another thing that you can start doing without having to drastically alter any of your accounts, or open a new account or anything of the sort. Instead, you simply need to adjust your budget and spending habits accordingly in order to use this method effectively. This is one of the easiest things that you can do without having to rebuild your whole financial world, either.
You should also make sure that, whenever you pay the monthly balances on revolving credit, you pay off your balance in full as well. That way, your principal does not accrue excessive interest, and you don’t have to pay more than you should. This way, you also prove to the major credit bureaus that you are trustworthy with money.
Dispute Your Credit if Applicable
If you see something on your credit report, say something to “the big three” credit reporting agencies. You can easily do this online and over the phone and the process is a lot more simple than you would probably think. You must have physical proof from another financial institution, and you must personally contact all three separate credit reporting agencies, but after all of the appropriate paperwork goes through, then you will have a credit score that will accurately reflect your financial history.
What About Firm Offers of Credit?
This is the big question that this whole article has been leading up to and the truth is simply this: opting out of these will not improve your score, but it will also not negatively affect your credit score, either. If you opt into one, then you may see some fluctuations in credit depending on the type of financial service that you opened or depending on how healthy your total accounts are, but opting out will not have any effect on your credit score.
Opting in or out is a personal choice for you to make. The screening and qualification processes may not have been your choice, but opting in or out of the service is always placed in the hands of the consumer.
Firm offers of credit are good for those who are looking to make their financial portfolios diverse, but they will not definitely have a positive impact your credit, either. You can repair your credit for little to no cost by paying your bills on time, as well as altering your credit utilization ratio to fall within the range most favorable by “the big three” credit bureaus. Credit reporting can help financial institutions tailor services so that they can best fit both your needs and the needs of the company.