Information Center – News and Articles about Credit Cards
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Credit Card Applications Are Successful If Your Credit Score Is up to Par!
What number is closer to most USA, UK and Canadian's hearts? Well, it's not their cell phone numbers for sure- it's their credit score! Credit scores dictate what happens in a person's life more then nearly anything else because how much credit you are allowed, which loans you qualify for and what car you can buy are directly proportionate to how high your credit score is. For this reason many credit card holders try to keep as good of tabs on their scores as possible. What is sometimes even more important is how this number can be used to your advantage!
First let's start with a definition. A credit score is defined as the numeric rating that combines your ability/ history of paying bills, your current level of debt and the forms of credit you are used to using. Whenever you get a credit card offer in the mail that says you have instant approval or can get a guaranteed approval credit card then you know that they have a good idea of what your credit score is. If you had bad credit then there is no chance that you would have gotten a top credit card offer that has instant approval- although there still are credit card offers for bad credit out there.
Before we get too much in detail about the components that make up a credit score, we're going to look at just how your credit information. The entire system starts with all the people that you do transactions with on a normal basis. This group of people includes landlords, credit card companies and banks. Whether you use First Premier Bank, Advanta Bank, Orchard Bank, Chase, Citibank, HSBC or another one of your local banks, you will be working with your credit score each time you make a transaction. Bouncing checks is a bad thing, keeping a constant balance is a good thing.
All the information that is tabulated by these financial institutes is then sent to one of the credit agencies that are spread throughout the country. What is not included in your credit history is your race, religion, sex or occupation.
All the information about you that is compiled at the agency is then sent to one of the three national credit bureaus- Equifax, Trans-Union or Experian. These companies in turn add the information to your credit history which will either make your credit score go up, stay the same or head down.
Now that we know where these reports come from we can see how the actual score is generated. Things such as your payment history, current debt level, length of your credit history and the types of credit that you are used to using are all considered in your credit score.
Just how is your credit score used? Well, obviously the higher your credit score, the better chance that you will get the best credit card offers and the best rewards programs- to say nothing of the best loan terms. If you have a high credit score lenders will feel more comfortable lending you money because you have shown in the past that you are reliable.
One thing to remember is that lenders look at your credit history in different ways. If a mortgage lender is looking at your credit history then they may not be too concerned with your total credit score (unless it is unusually low) as long as they can see that your current activity is great. On the other hand, a credit card company might be totally turned off when they see a low credit score and never even consider giving you a good unsecured credit card offer.
Now that we've defined credit scores it is time to look at how you can use your excellent credit (okay and fair credit as well!) to your greatest benefit. The key to using your credit score to your advantage is to make sure you always have a high score to begin with. If you have a constantly high score then you will never run into rejection. Lenders will actually be clawing over you for your business! Here are a few ways to keep your score high:
- Pay your bills on time. Just by paying your credit card bills, rent and utility bills and any other bills you may have on time you will be making the most important step in having a high credit score.
- Keep your monthly balances low, if not all paid off. If you always have high credit card/ loan debt then you will never have as good a score as you potentially could.
- Constantly opening and closing credit card accounts actually hurts your credit- not help it! Compare credit card offers when you first get a card and then take good care of it for a long time.
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Most credit tips say that the sooner you pay off your credit card balance - the less money you will lose on interest. On-time payments will favorably bound back on your credit score and payment history. This kind of advice is what we all are used to hear and read on the Web, in financial magazines, in tips columns. But does this financial behavior model really have a positive effect on your FICO score and credit report?
How can it be questioned, you ask? A perfectly disciplined plastic owner that pays off his or her balance before a lender could say Jack Robinson. Is not it any creditor's dream? No, it is not always so. Let's find out why a lender would want a different behavior model from a borrower and when this kind of paying down debts can weigh heavily against a cardholder.
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Indivos Corp. which majors in computer hardware and software development has been working on an electronic system for making payments over a number of years. The thing about this system is that it enables transactions to be made by scanning customers' fingertips. A number of retailers have already expressed interest in testing the new system.
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In the average, every American of these 40% spends $1.2 per every $1 he or she earns. Plastics have changed people's spending habits. These plastic devices allow and encourage people to spend more and more money. Around 18% of all purchases made by Americans involve credit card use. About 24% of the purchases are made with other types of plastics.
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If you are determined to eliminate your credit card debts and you have good credit, getting a balance transfer card is a good idea. You can shift your credit card balances with high interest rate to a card with much lower rate or 0% APR at all. But there is one thing that can reduce your profit from this kind of a deal. It is balance transfer fee.
Most balance transfer cards come with a fee for a transfer. Not long ago you could easily find a plastic for balance transfers with no fee. However, due to the credit card market crisis and economy slowdown, lenders have pulled these deals from the market. And now it is rather hard for a customer to find a balance transfer card that comes with no fee. But there are some ways to negotiate a better balance transfer deal.
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