Secured Credit Card

It’s not uncommon for people to have a poor credit rating. For many their credit score remains a mystery. They don’t understand how to improve it. They think it’s important to get as many credit cards as possible. While this strategy may seem tempting, it’s not always the best solution. Before trying to fix your credit problem, it’s important to understand exactly what goes into the credit score.

The following are the main things that are taken into consideration when calculating your credit score:

Payment history: This looks at if you’re making late payments or not. You should always try to pay your bills on time.

New credit: This is any new loans you get within the last 90 days.

History: Older people with an established credit history have the advantage over younger people who are just starting out.

Amount of debt: This is where many people get into trouble. It’s important to only borrow money if you can afford to pay it back.

Types of credit: There are 2 types – Secure and unsecured.

1) Secure: This is when credit is backed by something of tangible value. The most common are car loans and mortgages. Here the loan is backed by something tangible in case it defaults.

2) Unsecured: Here the bank has no collateral to back up the loan. The most common unsecured loans are credit cards.

The effect of credit cards

Credit cards can affect your credit in both a positive or negative way, depending on how you use it. An established account that’s used responsibly over many years will help. However late payments will have a negative impact. Late payments will stay on your credit history for years and even appear after the account is closed.

It’s also important to only have a few well established credit cards. It may be tempting to accept every pre-approved offer you receive, however too many will eventually drive down your credit score.

Remember to use credit cards responsibly. To avoid expensive finance charges, make sure you pay the balance off every month. They should only be used in case of an emergency. If used correctly they can help you establish good credit for years.

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Whenever it is time for you apply for a loan of any type, your credit is generally pulled. Depending on your credit history, your score may vary from anywhere within the 500s or lower, which is considered very bad to the 700s or higher which is considered excellent. Although many people consider the credit system within the United States to be somewhat cumbersome, it has been in place for many years and does not show any signs of changing soon. If you are trying to contact credit bureau agencies, you might be surprised to find that there are more than one that actually score you and are often looked at by the lending institutions.

The three credit agencies which take care of scoring your credit and ultimately help to determine whether you qualify for a loan are Experian, Equifax and TransUnion. Each of these three credit agencies will provide its own unique number, based on the scoring system that it uses to determine your credit. Whenever it comes time to contact credit bureau agencies, you need to figure out which of these agencies needs to be contacted. For example, if there is some fraudulent or mistaken information that appears on your credit report, you need to find out which of these agencies and is responsible for that report and contact them directly.

It may also be necessary for you to contact credit bureau agencies in order to receive a copy of your credit. As individuals, each of us are entitled to receive a free copy of our credit report on an annual basis. Although you certainly would not want to pull it all of the time because that would lower your credit scores, keeping in touch with your credit and knowing where your numbers are at is very important for you to make sure that no problems are occurring. Regularly contacting credit bureau companies and receiving a copy of your credit report can help you to avoid identity theft and to recognize any mistakes that were made on the report before they damage you too much.

There are also some companies which will contact credit bureau agencies for you and pull all three of your credit reports. Although you may have to pay a fee in order for this to take place, it may be worth your while considering the time that is involved in contacting each of the individual agencies one at a time.

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A credit inquiry is an item on your credit report that shows with permission a creditor requested your free credit score report.

Not all credit inquiries affect your credit score:

You may notice when you pull your credit report there are inquiries on there from a business you are not familiar with. The only inquiry that affects your credit score is the one where you are applying for credit. This is considered a hard pull on your report.

Inquiries that affect your credit score:

There is only one type of inquiry that affects your score. This type of inquiry is applications for a mortgage, auto loan and other credit, by you authorizing these creditors to access your credit report. This type of inquiry prompted by your own actions ends up on your personal credit report and affects your score.

An inquiry that does not affect your credit score: Checking your own personal credit report or any business that offers goods and services that requests your report. A business that you already have a account with that requests a check. A potential employer that does credit checks. Some of these types of inquiries might show up on your report but do not affect your credit score.

Checking your credit report does not affect your score:

Checking your credit report on a regular basis to ensure it is accurate and error free is recommended by Fair Isaac the inventor of the FICO Score. Maintaining a error free report is part of credit management which will improve your credit rating over time. Ordering your credit report at CreditScoreQuick.com does not hurt your credit score.

How credit inquiries are factored in your Credit Score:

There are five types of information used to calculate your credit score. Each category accounts towards a percentage of your score.

Payment History – 35%

Amounts Owed – 30%

Length of Credit History – 15%

Types of Credit in use – 10%

New Credit – 10%

Don’t let inquires scare you. There is nothing wrong with shopping for a better rate, or better terms on a loan. As you can see in the about chart, payment history is the biggest factor in calculation process of your credit score. The second biggest factor is how much of your approved credit limits are charged up. But of course you don’t want to go out and start applying for every credit offer out there either. Be responsible and have a good mix of credit, but stay away from too much credit as well You really on need 3 lines of credit reporting on your report.

Example:

1. credit card

2. car note

3. installment loan

This type of credit mix accounts for 10% of your score.

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Although credit cards have the potential of becoming a dangerous trap,

there are advantages to having at least one. For starters, credit cards

are necessary when renting a car or making airline reservations.

Furthermore, if an emergency arises, having a Mastercard can get you out of a financial bind.

Credit Cards for Bad Credit

Persons with high credit scores have little difficulty getting approved

for a credit card. With a bad credit credit card, individuals with a

low credit score are given the same opportunity to obtain a credit card.

Because of several factors, some people will not qualify for an

unsecured credit card. These factors include previous late payments, unpaid

medical bills, judgments, etc. Fortunately, there are many different

credit card companies that offer second chances.

What to Expect with a Bad Credit Credit Card

If applying for a bad credit credit card, do not expect the best rates

or terms. The majority of bad credit credit cards are secured. However,

some lenders will approve bad credit unsecured credit cards. To find

these credit card companies, be prepared to research various lenders.

Bad credit credit cards have higher interest rates and small credit

limits. However, once your credit score improves using the credit card,

the lender may gradually increase the limit. Additionally, most bad

credit credit cards will not tolerate inconsistency. Hence, making one late

payment may result in the lender closing the account or raising the

interest rate.

Annual fees and start-up fees are common among bad credit credit cards.

Before applying, research various bad credit credit cards and select

the company with the lowest fees.

How a Bad Credit Credit Card Improves Rating

To obtain a high credit rating, you must apply for credit. The same

method applies to persons hoping to boost their negative credit rating. By

opening new lines of credit, and keeping up with regular payments,

consumers will improve their credit score. A better credit rating makes

acquiring future credit much easier. Once achieving a good credit rating,

you will likely qualify for an unsecured credit card with a lower rate

and fewer fees.

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