Credit Card Study

General
What are Credit Cards
Advantages of Credit Cards
Applying for a Credit Card
Children and Credit Cards
Credit Card Terms and Fees
Credit Cards - The Right Tool for Merchants
Credit Cards as a Credit Instrument
Credit Cards Codes and Numbers
How Many Credit Cards are Enough
How to Select the Right Credit Card
Interest Rates for Credit Cards
Online Credit Card Usage
Risks of Credit Cards
Using Credit Card Overseas
Where to Use a Credit Card
Zero Rate Credit Card or Not

Major Credit Card Issuers
Wamu credit cards
American Express Credit Cards
Capital One Credit Cards
Chase Credit Cards
Citi Credit Cards
Diners Club Credit Cards
Discover Credit Cards
Mastercard Credit Cards
Visa Credit Cards

Credit Cards and Debt
Avoiding Credit Card Debt
Bad Credit and Credit Cards
Credit card debt consolidation
Credit Card After Bankruptcy
Credit Cards and Credit History
Getting Out of Credit Card Debt
Filing For Bankruptcy
If a Credit Card Issuer Sues You
The Optimal Credit Card Balance
Credit Card Debt Refinance

Credit Cards and Fraud
Avoiding Credit Card Fraud
Credit Card Fraud Protection for Merchants
Famous Credit Card Frauds
Famous Credit Card Law Suits
How Credit Card Issuers Cheat
Merchant Credit Card Fraud
Protect Your Card
What to Do in Case of Identity Theft
How Consumers Cheat

Types of Credit Cards
Business Credit Cards
Debit Cards vs. Credit Cards
Low Interest Credit Cards
Rewards Credit Cards
Secured Credit Cards
Student Credit Cards
Types of Credit Cards
Unsecured Credit Cards
Zero Credit Cards

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Disclaimer
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Credit Cards and Credit History

No matter if we like it or not but we live in a society where every byte of information is recorded and credit cards and our credit activity as whole are not an exception. In fact, one might think that the whole credit system is built around not the almighty dollar but around the almighty credit report.

Credit reports are actually credit history because they document our credit transactions over time. Credit reports include data from different sources, not only credit cards but also loans, mortgages and so on. Your credit report is not top secret, or maybe it is more precise to say that it is not private at all because everybody, who has a legitimate business interest in you – i.e. a prospective lender, an employer, or a landlord may request a copy of your credit report from one of the three main agencies that prepare credit reports (in the USA, in other countries the agencies are different): Equifax, Experian and TransUnion.

You can also request your free copy of your credit report. What is more, you are strongly advised to do it because this way you will know what exactly is written in it. Since the three agencies use different sources of gathering data, it is very likely that the three reports will be somehow different, so it is best that you get at least two of them. Knowing the contents of your credit report is important because sometimes, when you are rejected for a loan without a reason, it turns out that there is a reason and it is what is written about you in your credit report.

Sometimes credit report agencies make mistakes, so it is really best if you see your credit report and check if everything there is correct. This can save you a lot of hassle later, when you apply for a new line of credit. Also, you have the right to know who has inquired about your credit report over the last six months, so make this request as well.

One of the most important pieces of data in your credit report is your credit score. Your credit score is calculated based on your financial activity, so if you have unpaid bills, this will also be reflected by your credit score. Credit scores matter because they are one of the primary ways in which lenders determine if they can give you credit or not. If your credit score is low, then you are a credit risk and your choices for credit are substantially narrowed.

We won't delve into the mathematical formulas of calculating credit scores. It is enough to know that the most common methodology for calculating credit scores – the Fair Isaac – uses 22 pieces of data from the three major credit bureaus. The lowest possible score is 300 and the highest is 850. Statistically, the average credit score is around 700, so if you fall behind it, you are not doing well.

After the data is gathered, it is further calculated and the final credit score consists of five most important categories:

  • Payment history (35% weight in the rating)

  • Length of credit history (15%)

  • New credit (10%)

  • Types of credit used (10%)

  • Debt (30%)

As you see, your payment history is the most important part of your credit score, so it is not the same if you pay regularly or not. Debt is the second more important criterion, so being heavily in debt can certainly ruin your credit score for long time ahead. The other three criteria have less importance but still they matter. For instance, if you constantly open new cards, this still has a negative influence over your credit score, not matter that you pay back on time.

Now, when you know what credit history and credit scores are, probably you will take in earnest the warnings that you mustn't have too many credit cards open and that you should pay your bills on time. Damaging your credit score once can cost you a lot in terms of higher interest rates and you might need several years to repair it!