Nowadays we all feel OK about credit card offers. Often we apply for a plastic and don't even think what influence it might have on our lives. The first thing that your credit card influences is your credit score. You might have not known that only some 40% of all the Americans actually know what their credit score is. Is it really important to understand the importance of this influence?
The rest of the 100% of our country's citizens have no idea or just a slight knowledge about the credit score issue. In case you are one of them, you better learn everything about the credit score and the way it may affect you directly.
Credit reporting exists for more than hundred years. Although it may sound kind of unbelievable, but it is so. Business people used to gather and share with one another financial information about all their clients.
In 1960 customers received the right to examine their credit history reports and find the misleading facts. Only in 1971 consumers go the right to view and even correct their credit records. Fair Credit Reporting Act was so enacted.
In 1989 Equifax Together With Fair Isaac And Company developed a credit scoring system that is being widely used up to now. The scoring system was called "FICO".
Let me enumerate some factors that affect your score.
1. First, it is your credit history. Both your credit history and your credit score are interconnected. If you have an excellent credit history, you also have an excellent credit score - and visa versa. May seem strange but a one month late credit card payment can harm your credit score more than a bankruptcy several years ago.
2. Your outstanding debt is the second factor I would like to speak about. In case your credit limit is getting closer to the amount that you owe on a card, your score will be severely damaged. Keep in mind that a high limit on one card is actually worth than a low balance on two.
3. Thirdly, is the length of your credit history. When your accounts are open for a long time, it influences your credit score positively.
4. Moreover, consider the recent enquiries on your credit history. If you have applied for the new credit card recently, it also may damage your score. Therefore, specialists say not to apply for any cards if you are still in the process of approval for another card.
5. Finally, types of the credit that you are using also have a great influence. Always remember, that loans from financial companies won't have a good impact.
Actually, there are three credit reporting agencies in the US: already mentioned Equifax, TransUnion, and Experian. As for national credit score in the US, it is around 650. In case your credit score leaves much to be desired, there are methods to improve it. To name just a few:
1. Make all the payments on time. Once I couldn't make my payment on time. I certainly didn't want to have my history spoiled, so found the right solution. I called my credit card company and asked for so called payment schedule. I found a wonderful time to pay my bills - right after I get my pay check.
2. Never close old inactive credit card accounts as it will tell about you good feature of character. You will be considered a reasonable client.
3. Also try to maintain low balances on the cards that you use. Chose the best credit card offer and clearly determine how you are going to use it.
4. Annually get your credit report. It is exactly what my mom does. She gets a copy of the report every year and tries to analyze the mistakes that she might have done. She finds it very helpful. I have also tried it.
All in all, keep in mind that credit score plays a key role in your credit availability and your eligibility. Always try your best to keep it as high as possible.
|
