Credit, the Good the Bad and the Ugly
Would you like to , lease an apartment, drive that sexy new Mustang or convert your den into a family friendly media room? If so, unless you are financially independent, such as having been blessed with a trust fund, you will need credit. It sounds easy so far, doesn't it? Well, maybeâ€¦ Let's take a more comprehensive look at the intricacies and pitfalls of credit spending.
Credit cards are not created equal. When comparing credit card offers you will need to consider the following:
- What is the Interest rate (these change rapidly)
- Are they offering a low or 0 interest introductory offer
- If so, how long will the low or 0 interest last (usually 6 months, sometimes a year)
- Are there cash back or rewards offers
- Will they donate a percentage to your favorite cause
- Can you personalize your card
- If you default, what is the default interest rate
To get your best deal you will need to spend some time investigating various offers. To avoid jumping all over the net go to our Credit Cards page to learn what is available. You also need to know something about the big three credit bureaus in the US.
The Big Three Credit Bureaus
Credit bureaus perform a service for lenders and spenders. More than likely your name is somewhere in the vast vaults of data at the three largest credit bureaus, Equifax, TransUnion Credit Services, and Experian. That may or may not be good news. If you have favorable credit ratings, there are no errors and your creditors have reported to the bureau, it is good news. However, if the opposite applies in any of these categories it can be a challenge or even a nightmare. Recently the federal government began requiring each of the Big Three to provide to you, free of charge, one credit report per year. It is imperative to know what is in your report.
If you are a new graduate or just decided to buy your own home you may not have a credit record. Or, you may have been borrowing for a while, but have a less than stellar credit score. If you are attempting to establish a credit history or mend a poor history, it would behoove you to choose a credit cards company that reports promptly to the credit bureaus. In their ads, some banks, such as Orchard Bank and New Millennium Bank, proudly list reporting as an advantage. When in doubt call the lender and ask.
Your Credit Score
Your credit score is a three digit number that determines if you are approved for your student loan, buy the mammoth television you adore or put braces on your child's teeth. Large expenditures frequently require credit to pay for them. Your credit score is figured from credit reports made to the bureaus by your lenders. These reports include such information as payment history, amount borrowed, balance due and anything else that affects your credit worthiness.
Scores range from 350 to 900, naturally, the higher the better. The median credit score in the United States is 723. This will vary according to the state. To get the most favorable interest rates your score should be around 720. Borrowers with scores of around 520 would probably pay higher interest rates, perhaps 3 or 4 points higher. (Read more about Credit Score at ' Reading Credit Score Numbers' and ' What Does the Credit Score Mean?' articles.)
Boost Your Score
If your score is dismal, don't despair. According to CNNMoney.com you can boost your score. They suggest:
- Pay your bills on time
- Keep balances low on credit cards
- Don't open new accounts you don't need
- Use your credit cards responsibly
- Challenge incorrect information
Begin by checking your reports for accuracy. Then follow responsible spending habits. Yes, I know --- that is no fun. You can order your free report by calling the numbers listed below. Visitors can obtain a free credit report for 30 days if you missed the free one at Free Credit Report page on MarketProSecure Credit Center.
Experian Credit Services
P.O. Box 2104
Allen, TX 75013-2104
Automated Credit Report Order Line: 1-888-397-3742
Trans Union Credit Services
P.O. Box 1000
Chester, PA 19022-1000
Automated Credit Report Order Line: 1-800-888-4213
Equifax Credit Services
P.O. Box 105851
Atlanta, GA 30348-5851
Automated Credit Report Order Line: 1-800-997-2493
Similar Articles and Information Resources:
- 10 Hints for Pumping Up Your Credit Score
- Reading Credit Score Numbers
- What Does the Credit Score Mean?
- Building and Protecting Business Credit
- Bankruptcy: Chapter 7 vs. Chapter 13
For more new articles see our Personal Finance Learning Center section.