Credit Cards And Your Credit History
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Credit Cards and Your Credit History
Credit Cards: Are They for Everyone?
Credit cards are widely used across the U.S. and globally, offering a convenient payment method in stores, over the phone, online, or even via fax. But can anyone access this sought-after financial tool? To find out, we need to understand the credit screening and rating system.
Understanding Credit History
Your credit history is tracked by three major credit bureaus: Experian, Equifax, and TransUnion. These organizations compile, store, and sell credit reports that reflect your bill-paying habits. A credit report may also be called a credit record, file, or history.
Major Credit Bureaus:
- Experian: [Visit Website](http://www.experian.com/) | Tel: 800-301-7195- Equifax: [Visit Website](http://www.equifax.com/) | Tel: 800-685-1111
- Trans Union: [Visit Website](http://www.transunion.com/) | Tel: 800-916-8800
Your Rights Under the Fair Credit Reporting Act
Passed in 1970, this law gives consumers access to their credit files, allowing them to dispute inaccuracies and see who has viewed their credit report in the last six months. If there's incorrect information on your report, you can ask for an investigation. If unresolved, you can add a statement explaining the dispute, which stays on your report as long as the negative information is reported.
If you are denied credit, you can request a free copy of your credit report from the involved bureau if you act promptly. Otherwise, you can obtain it for a small fee.
The good news? Negative marks are removed after seven years. The downside? That can feel like a long wait.
Building a Credit History
People with no credit history often struggle to obtain major credit cards or loans. Banks usually require proof of creditworthiness, which might involve a cash deposit, savings account, or collateral like a house. Many fail to cultivate a credit history by avoiding small loans and consistent payment records.
Steps to Start Building Credit
1. Start Small: Consider applying for a gasoline card or department store cards, which can help establish a credit record.
2. Secured Credit Cards: A secured Visa or MasterCard involves a deposit as collateral, with a small credit limit. Use it responsibly to build credit history.
3. Timely Payments: Always pay bills on time. Prioritize cards with low rates and no fees, and limit their use to emergencies.
4. Collateralized Loans: Take a small loan and repay it promptly to establish creditworthiness.
What is FICO and Why It Matters
FICO, named after the Fair Isaac Company, is a scoring model developed by Experian to assess lending risk. It considers your credit history over several years, so improving your score is a long-term process. Enhance your credit by:
- Reducing debt.
- Paying debts promptly and fully.
- Closing unnecessary accounts.
- Avoiding bankruptcy and foreclosures.
How Your Score is Calculated
Your FICO score is determined through a series of criteria, including:
- Duration at your current address.
- Job or profession stability.
- Financial obligations (debt-to-income ratio).
- Payment history.
- Credit usage and availability.
- Length of credit history.
Key Factors:
Important factors include current account balances, the number of revolving accounts, recently opened accounts, past-due amounts, and credit inquiries.
What is a Good Score?
The benchmark FICO score is 620. Scores below this indicate high default risk. Scores between 620 and 650 place you in a "questionable" category, requiring additional documentation for approval. A score of 650 or above is regarded as excellent, often qualifying you for the best loan rates.
---
By understanding and managing your credit history responsibly, you can unlock the many benefits that credit cards offer while building a solid financial future.
You can find the original non-AI version of this article here: Credit Cards And Your Credit History.
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.