Lenders, Not Consumers, Benefit From The Current Credit System

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Editor’s note: This is a guest article from Paul Maher of MyCreditRepairTips

As has always been the case, the current credit system (no matter the type of loan or credit extended) definitely weighs in the lender’s favor. They determine the rates, terms and specifics of a loan. And of course, they have the final say as to whether you get a loan or not. They measure the amount of risk involved and write a loan that minimizes their risk—at the consumer’s expense.

For larger loans such as a mortgage or car loan, creditors take extensive measures to protect themselves. Such loan contracts can be lengthy and detailed, giving the creditor the advantage on a number of counts.

Such items as penalties and fees for late payment are designed not only in an attempt to keep the consumer making their payments on time, to the lender, these funds are used to replace the money they may lose through the defaulting of other contracts. However, if the amount of defaults they experience is low (another reason loan terms are in their favor), those late fees become income for the lender.

Another way that lenders tilt the table in their favor is by requiring those with poor or marginal credit scores to pay higher interest rates. And the difference can be substantial. While a consumer with a good credit score and credit history might pay 7% to 8%, a poor credit risk may be required to pay 11% to 32%. Over the length of the loan, particularly for loans of three years or more, the total cost of the loan can be remarkably higher.

It’s often the price that has to be paid for a poor credit score and credit history. Some companies specialize in working with consumers with marginal credit. It’s a good idea, as a general rule, to turn to such companies for help strictly if it’s your only option. There are lot of great credit repair techniques that you can find on a myriad of credit repair blogs. Many don’t think there is anything they can do about this but they don’t realize…

Errors on credit reports are very common

79% of all credit reports contain errors. More than 1/4 of them are bad enough to be denied credit.Credit bureaus, especially the big three of Experian, Equifax and TransUnion, have a poor track record of keeping your credit reports mistake free. Problems such as a charge to an account you did not make or a debt that has been paid off still showing as unpaid happen more often than you might think.There is a bit of irony in this in that every time a credit bureau investigates wrongful charges and information on your account, it costs them money. Thus, they will try to discourage you from continuing with your claim.Although it would seem to be in the credit bureau’s interest to keep from introducing errors on your report, these companies continue to post wrongful information at an alarming rate. That’s why when errors appear on your credit report, no matter how minor, it’s wise to take the necessary steps to have it removed. It is easier than many realize. If you would like more tips on how to accomplish this, visit MyCreditRepairTips.com. Until next time, keep your head up and enjoy life to the fullest!

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