It’s better to have credit and not need it, than to need credit and not have it! For most folks, this is abundantly clear. Everybody should have access to a sufficient line of credit, and manage it well. Sensible advice for sensible folks. But what happens when you find yourself in a bind; either you need credit and you don’t have it, or worse yet – you don’t qualify for credit? These are difficult situations to contend with. Credit availability is one of several factors that goes into calculating your credit score. Leading analysts on this topic routinely advise clients to understand each of the major categories of a credit score, notably:
- New Credit applications account for 10% of your credit score
- The Type of Credit you have accounts for 10% of your credit score
- Your Credit History makes up 15% of your credit score
- The Total Outstanding Balance makes up 30% of your credit score
- Your Payment History makes up 35% of your credit score
As you can tell, each component of this pie chart has an impact on your eligibility for credit, and you have direct control over every category in the credit assessment continuum. Credit scores are 3-digit numbers that are calculated by complicated mathematical algorithms. The Fair Isaacs Corporation (FICO) model is used to generate credit scores. The typical score will range from a low of 300 to a high of 850. The lower your score, the less ‘Credible’ you are perceived to be by lenders. Clients with low credit scores are typically assessed to be risky borrowers and will have stringent payment terms and conditions imposed on them by lenders.
There are 3 credit reporting agencies – credit bureaus – in the United States. These include TransUnion, Equifax, and Experian. In the United States, everyone is entitled to 1 free credit report per year from each of these three credit reporting agencies. It is imperative to stay abreast of your credit score and your credit profile, since ID theft is rampant as hacking has become commonplace. It is entirely possible that mistakes or omissions on your credit profile may adversely affect your availability of credit. That’s why banks, non-bank institutions recommend that customers stay on top of their personal credit profiles at all times.
What Are the Most Important Considerations with Lines of Credit?
A highly reputable authority on credit cards, CreditLoan advises customers to consider their options with credit cards carefully. It is imperative to select a credit card that is best suited to your individual needs. There are credit cards with a multitude of benefits such as rewards, travel perks, cashback, 5% low interest, business credit cards, cards with no annual fees, secured credit cards, balance transfer availability and the like. Credit cards with high APRs and annual fees should be avoided since these will simply incur additional expenses every month. The best credit cards are those with low APR’s, preferably 0% for 12 months or 18 months, high cashback percentages, generous travel perks and rewards, etc. It takes some searching to find these types of credit cards, but many credit aggregator platforms are available on the market to make the search easier and more efficient.
Tackling credit card problems requires going to the root of the problem – expenditure. If you find yourself conducting a lot of online purchases, it may be worthwhile applying for store credit cards where perks and benefits are available from retailers. Popular store credit cards include the Walmart card, T.J. Maxx, and Barnes & Noble MasterCard options. With interest rates set to increase in December 2017 for the last time in the year it’s a good idea to pay off credit card debt as quickly as possible. Rate hikes are never good for credit card debt, as they increase the monthly burden that must be paid. Another important consideration with credit cards is the following: Never withdraw cash from your credit card at an ATM, or abroad. The rates are extortionary. Rather use debit cards with travel money or purchase Forex from a competitive Forex broker. These tips will serve you well when you’re managing your credit cards, personal loans, business loans, and other lines of credit.
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