How will the New credit reporting rules affect people who are already struggling financially?
From my understanding by paying your bills more than 5 days late will not lead you into bankruptcy or stop you from getting a new loan in the future, however it may mean that lenders offer you credit at a higher interest rate. This of course would not help you as you are already struggling with your finances. However, no matter how bad you think things might be for you financially, there are always things you can do to improve your situation. Set a Budget The first thing you must do is to set a budget. List down all sources of income you receive each month, including any allowances. Then list all your sources of expenses and spending. List all your bills such as rent, telephone, electricity, car maintenance, credit card and other loans. Keep a diary for a month for all your discretionary spending - including coffees, lunches, and other odd bits and ends. You can also talk with your existing lenders and come to some agreement on reducing you interest rates on your debts and the repayments. But remember any reduction in repayments may increase your repayment period and the total interest you have to pay in the long term. If you need help setting up your budget here are some links to resources you can download to help you get started: Once you set up your budget you want your total income to be more than your total expenses. If it isn't you will be getting further and further behind each month. Some things you can do are to increase your income - get a job/second job, sell some unwanted items, or start a small home business. Some things you can do to reduce your expenses - make coffees and lunches at home before going out and buying these, pay off higher interest debts first, consolidate all your debts into a lower interest rate loan, reduce discretionary spending to an absolute minimum, cancel all unnecessary services, etc. Debt Consolidation In regards to a Debt Consolidation for your existing personal loans and credit cards into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Assistance improving your skills and getting a higher paid job If you are finding it hard to get a job, especially one that pays a bit more, look into your options of doing a course and improving your skills. There is plenty of assistance available for those wanting to improve their skills in order to improve their chances of getting a better job. Check out Centrelink's website for more information on Payments for students and trainees. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians. Learn how to manage your money so you can get out of your debt and can lead a much more comfortable and less stressful life into the future.
I notice that a lot happened four months ago. You were denied credit twice. Your income went up from $20k to $60k. I'm wondering if you were denied credit based on your $20k income. Since you couldn't provide proof of your income I wonder if they used $0 for your income.  Debt to income ratio is one significant factor included in the credit score calculation. You may not have a lot of debt, but if you don't have any income even a few hundred dollars on a credit card would throw your debt to income ratio into a panic. I'm assuming that your change from $20k to $60k income involved a change of jobs. Perhaps now you can provide proof of income. You would certainly need to do that before being approved for a mortgage.  Well that's my two cents about what may (or may not) have gone wrong last time. As for what to do next I would agree that the most helpful thing you could do is check your credit score and fix any errors that might negatively impact your credit score. (There might also be non-errors that need addressed such as open credit accounts that you thought you had closed.) When building credit history, time is on your side. If you just go on living your life and paying your bills promptly, your credit will slowly climb to an acceptable level. Unfortunately in the time frame you mentioned (~1 year) there isn't really enough time to build it significantly.  You bring up a valid point about credit applications reducing your credit score. Of course, that effect is somewhat minimal and temporary (2 yrs according to the thread linked to above). But again 1 year is not enough to recover. If you're considering applying for additional credit as a means to improve your credit score it may be too late to reap the benefits before your mortgage application. Of course if you could pay off any debts, that would help your debt to income ratio. But it would also reduce any house down payment you could save up and thereby increase the amount of your mortgage.  Better just save those pennies (or preferably Washingtons and Benjamins) to put toward a down payment. Credit in general having no significant change between an income level or net worth is due to the economic reciprocity principle inherent in many societies. Although some areas of credit may be more admirable to those who aren't as well-off, such as car loans, the overall understanding of credit is a trust agreement between someone getting something (e.g., credit card user) and someone giving something (e.g., bank or company). Credit doesn't have to mean just money -- it can be anything of value, including tangible materials, services, etc. The fact is that a credit is a common element in most economical systems, and as such its use is not really variable between income levels/etc. Sure, there is variance in things like credit line amounts and rewards, but the overall gist is the same for everyone -- borrowing, paying back, benefits, etc. All of these exchanges form the same understanding we all know and follow. Credit brings along with it trust -- the form represented in a score. While not everyone may depend entirely on credit, and no one should use credit as a means of getting by entirely (money), everyone can understand and reap the benefits of a system whether they make 10K a year of 10M a year. This is the general idea behind credit in the broadest sense possible. Besides, just because one has or makes more money doesn't mean they don't prefer to get good deals. Nobody should like being taken advantage of, and if credit can help, anyone can establish trust. In the United States, when applying for credit cards, proof of income is on an honor system. You can make $15k a year and write on your application that you make $150k a year. They don't check that value other than to have their computer systems figure out risk and you get a yes or no. It was traditionally easy to attain credit, but that got tightened in 2008/2009 with the housing crisis. This is starting to change again and credit is flowing much more easily. Credit scoring has changed recently and the answer to this question will have slightly changed. While most points made here are true: But now (as of July 2017) it is possible having a large available credit balance can negatively effect your credit score directly:  ... VantageScore will now mark a borrower negatively for having   excessively large credit card limits, on the theory that the person   could run up a high credit card debt quickly. Those who have prime   credit scores may be hurt the most, since they are most likely to have   multiple cards open. But those who like to play the credit card   rewards program points game could be affected as well. source If your accounts have an overdraft facility, then every open account is classed as available credit which has a negative effect on your credit score.  It's not normally a major concern but it is a factor.   (nb. this definitely applies to the UK, maybe not where you are) So My question is. Is my credit score going to be hit?  Yes it will affect your credit.  Not as much as missing payments on the debt, which remains even if the credit line is closed, and not as much as missing payments on other bills...   If so what can I do about it?  Not very much.  Nothing worth the time it would take.  Like you mentioned, reopening the account or opening another would likely require a credit check and the inquiry will add another negative factor.   In this situation, consider the impact on your credit as fact and the best way to correct it is to move forward and pay all your bills on time.  This is the number one key to improving credit score.   So, right now, the key task is finding a new job. This will enable you to make all payments on time.  If you pay on time and do not overspend, your credit score will be fine. Can I contact the creditors to appeal the decision and get them to not affect my score at the very least? I know they won't restore the account without another credit check). Is there anything that can be done directly with the credit score companies? Depending on how they characterize the closing of the account, it may be mostly a neutral event that has a negative impact than a negative event.  By negative events, I'm referring to bankruptcy, charge offs, and collections.  So the best way to recover is to keep credit utilization below 30% and pay all your bills and debt payments on time. (You seem to be asking how to replace this line of credit to help you through your unemployment.) As for the missing credit line and your current finances, you have to find a way forward.  Opening new credit account while you're not employed is going to be very difficult, if not impossible.  You might find yourself in a situation where you need to take whatever part time gig you can find in order to make ends meet until your job search is complete.  Grocery store, fast food, wait staff, delivery driver, etc. And once you get past this period of unemployment, you'll need to catch up on all bills, then you'll want to build your emergency fund.  You don't mention one, but eating, paying rent/mortgage, keeping current on bills, and paying debt payments are the reasons behind the emergency fund, and the reason you need it in a liquid account.   Source:  I'm a veteran of decades of bad choices when it comes to money, of being unemployed for periods of time, of overusing credit cards, and generally being irresponsible with my income and savings.  I've done all those things and am now paying the price.  In order to rebuild my credit, and provide for my retirement, I'm having to work very hard to save.  My focus being financial health, not credit score, I've brought my bottom line from approximately 25k in the red up to about 5k in the red.  The first step was getting my payments under control.   I have also been watching my credit score.  Two years of on time mortgage payments, gradual growth of score.  Paid off student loans, uptick in score.  Opened new credit card with 0% intro rate to consolidate a couple of store line of credit accounts.  Transferred those balances.  Big uptick.  Next month when utilization on that card hits 90%, downtick that took back a year's worth of gains.  However, financially, I'm not losing 50-100 a month to interest. TLDR; At certain times, you have to ignore the credit score and focus on the important things.  This is one of those times for you.  Find a job.  Get back on your feet.  Then look into living debt free, or working to achieve financial independence. Bankrupting them isn't going to help anyone. They should be kept alive and forced to provide everyone with free lifetime credit monitoring.  I actually just enrolled in their trustedid this morning for my one year trial and it SHOULD be a lifetime service I get for free.  Frozen credit files should become the norm and you should be notified via text if someone wants to access your file at which point you can text back YES or NO (much like current fraud alerts).  There is actually a lot that can and should be done. I'm worried that nothing is actually going to change because the government is moving very slowly here and people quickly forget about this stuff. "I agree it seems insulting to pay the credit reporting agencies, but I have no choice at this point. I'd rather pay the small fee per each of them, to freeze accounts, then have thousands stolen. My husband has excellent credit and also we have a rather substantial savings account, that his info could give ""would be"" identity thieves access too.  This whole situation is messed up, and unacceptable! For one, no one EVER gave these credit reporting agencies access to their info, it's just a ""give in"" being born here. And for two, no one asked for their information to be kept in insecure databases. Higher standards need to be implemented.  My poor 72 year old father is outraged when I tell him his info is online. He says, ""I don't use the Internet!!! How can it be there?!?!"" (Poor old soul lol)  I just said, ""well dad, it is, whether you use it, or like it or not. It's there""  I just need to make sure we are taking the correct steps to protect ourselves. Honestly, I am not finance savvy. This is why I'm asking here in this sub. Thank you for responding, and thanks to anyone else who may offer any advice.  I'm not terrified, but I'm definitely miffed..." Note that this kind of entry on your credit record may also affect your ability to get a job. Basically, you're going on record as not honoring your commitments... and unless you have a darned good reason for having gotten into that situation and being completely unable to get back out, it's going to reflect on your general trustworthiness. I'm going to be buying a house / car / home theater system in the next few months, and this loan would show up on my credit report and negatively impact my score, making me unable to get the financing that I'll need. I have a car loan paid in full and even paid off early, and 2 personal loans paid in full from my credit union that don't seem to reflect in a positive way and all 3 were in good standing. But you also  My credit card utilization is 95%. I have a total of 4 store credit cards, a car loan, 2 personal loans. So assuming no overlap, you've paid off three of your ten loans (30%).  And you still have 95% utilization.   What would you do if you were laid off for six months?  Regardless of payment history, you would most likely stop making payments on your loans.  This is why your credit score is bad.  You are in fact a credit risk.  Not due to payment history.  If your payment history was bad, you'd likely rank worse.  But simple fiscal reality is that you are an adverse event away from serious fiscal problems.   For that matter, the very point that you are considering bankruptcy says that they are right to give you a poor score.  Bankruptcy has adverse effects on you, but for your creditors it means that many of them will never get paid or get paid less than what they loaned.   The hard advice that we can give is to reduce your expenses.  Stop going to restaurants.  Prepare breakfast and supper from scratch and bag your lunch.  Don't put new expenses on your credit cards unless you can pay them this month.  Cut up your store cards and don't shop for anything but necessities.  Whatever durables (furniture, appliances, clothes, shoes, etc.) you have now should be enough for the next year or so.   Cut your expenses.  Have premium channels on your cable or the extra fast internet?  Drop back to the minimum instead.  Turn the heat down and the A/C temperature up (so it cools less).  Turn off the lights if you aren't using them.  If you move, move to a cheaper apartment.  Nothing to do?  Get a second job.  That will not only keep you from being bored, it will help with your financial issues.   Bankruptcy will not itself fix the problems you describe.  You are living beyond your means.  Bankruptcy might make you stop living beyond your means.  But it won't fix the problem that you make less money than you want to spend.  Only you can do that.  Better to stop the spending now rather than waiting until bankruptcy makes your credit even worse and forces you to cut spending.   If you have extra money at the end of the month, pick the worst loan and pay as much of it as you can.  By worst, I mean the one with the worst terms going forward.  Highest interest rate, etc.  If two loans have the same rate, pay the smaller one first.  Once you pay off that loan, it will increase the amount of money you have left to pay off your other loans.  This is called the debt snowball (snowball effect).   After you finish paying off your debt, save up six months worth of expenses or income.  These will be your emergency savings.   Once you have your emergency fund, write out a budget and stick to it.  You can buy anything you want, so long as it fits in your budget.  Avoid borrowing unless absolutely necessary.  Instead, save your money for bigger purchases.  With savings, you not only avoid paying interest, you may actually get paid interest.  Even if it's a low rate, paid to you is better than paying someone else.   One of the largest effects of bankruptcy is that it forces you to act like this.  They offer you even less credit at worse terms.  You won't be able to shop on credit anymore.  No new car loan.  No mortgage.  No nice clothes on credit.  So why declare bankruptcy?  Take charge of your spending now rather than waiting until you can't do anything else. I've seen an increasing number of writeups about this.  Some peers think people just use more credit cards nowadays (instead of cash for instance), and that it's normal.  I'm not buying it.  I think this is a serious problem and I'm wondering how we're going to see this play into the US economy moving forward.  Also, if anyone knows how the EU is doing with credit card debt, I'd be grateful for any data points. "To answer the heart of your question, it would be illegal for any credit bureau or creditor to somehow ""penalize"" you just for trying to make sure that what's being reported about you is accurate.  That's why the Fair Credit Reporting Act exists -- that's where the rights (and mechanisms) come from for letting you learn about and request accurate reporting of your credit history. Every creditor is responsible for reporting its own data to the bureaus, using the format provided by those bureaus for doing so. A creditor may not provide all of the information that can be reported, and it may not report information in as timely a manner as it could or should (e.g., payments made may not show up for weeks or even months after they were made, etc.). The bottom line is that the credit bureaus are not arbiters of the data they report.  They simply report.  They don't draw conclusions, they don't make decisions on what data to report.  If a creditor provides data that is within the parameters of what the bureaus ask to be provided, then the bureaus report precisely that -- nothing more, nothing less. If there is an inaccuracy or mistake on your report, it is the fault (and responsibility) of the creditor, and it is therefore up to the creditor to correct it once it has been brought to their attention.  Federal laws spell out the process that the bureau has to comply with when you file a dispute, and there are strict standards requiring the creditor to promptly verify valid information or remove anything which is not correct. The credit bureaus are simply automated clearinghouses for the information provided by the creditors who choose to subscribe to each bureau's system.  A creditor can choose which (or none) of the bureaus they wish to report to, which is why some accounts show on one bureau's report on you but not another's. What I caution is, just because a credit bureaus reports on your credit doesn't mean they have anything to do with the accuracy or detail of what is being reported.  That's up to the creditors." I just wanted to let people know of a strange little way bankruptcy works in society when dealing with individuals and when dealing with businesses.  If I as a person declare bankruptcy, my credit score goes downhill. I find loans have higher interest rates, some people won't lend the amounts I want, and I have to pay more up front.  If as a business I declare bankruptcy, my individual credit score (not business) does not suffer AT ALL. My business likely will have a harder time getting loans, that is unless someone buys me out or I collapse the business and start a new business, maybe even the exact same business with the same clients. I personally, am not held accountable for anything (unless I was a sole proprietor of course and didn't incorporate).  That to me, is the major problem. Corporations mean never having to say you're sorry. No matter how high up you are, you are never individually accountable for your actions.  In fact, I highly suggest anyone considering bankruptcy simply form a corporation, dump their debt assets into it, and then have the corporation declare bankruptcy.  Viola, instant clean credit score and all your debts are paid.  Just watch out for [vicarious liability :p](http://en.wikipedia.org/wiki/Vicarious_liability) "I don't know that this can actually be answered objectively.  Maybe it can with some serious research.  (Read: data on what the issuers have been doing since the law went into affect.) Personally, I think the weak economy and general problems with easy credit are a bigger issue than the new rules.  Supposedly, there is evidence that card issuers are trying to make up for the lost income due to the new regulations with higher fees.  I believe that your credit rating and history with the issuer is a larger factor now.  In other words, they may be less likely to lower your rate just to keep you as a customer or to attract new customers. According to The Motley Fool, issuers dropped their riskiest customers as a result of the new regulations. Some say that new laws simply motivated the issuers to find new ways to ""gouge"" their customers. Here are two NYTimes blog posts about the act: http://bucks.blogs.nytimes.com/2010/02/22/what-the-credit-card-act-means-for-you/ http://bucks.blogs.nytimes.com/2010/07/22/the-effects-of-the-credit-card-act/ As JohnFx states, it does not hurt to ask."