I have invited Susan Larsen from American West Bank to introduce credit to us and explain a bit about how your credit card affects your credit score.
Want to learn more about your credit score and using credit cards?
Here’s some information to assist you from your local community banker:
Did you know your credit score is your complete credit history summed up in a three-digit number? And a very powerful number! Your score can determine if you get a mortgage, car loan, credit card, or even things like insurance and cell phones.
Your credit score is important—it’s like your handshake, resume, and reputation—it represents who you are.
Three main credit reporting agencies, Experian, TransUnion & Equifax, continuously gather a tremendous amount of information about you and then apply it to a set formula to determine your score. Everyone has three different scores, one with each agency.
It’s important to note creditors are not required to submit information to all three agencies. In fact, some send data to just one. Each agency weights the information differently so your three scores may differ, but they’re typically within a reasonable range.
Credit scores range from 300-850. Here’s a quick guideline:
- Excellent: 750+;
- Very Good: 720-749
- Acceptable: 660-719
- Anything lower may be troublesome.
One thing to remember is your score is a prediction of the likelihood you will be 30 days late on any financial obligation within the coming 12 months—the lower the number the greater the odds you may miss a payment. Creditors use these sophisticated predictions to help determine if they should issue you credit. Beyond just a Yes/No, your score may impact your interest rate, so keeping your score high can translate into future savings!
Your credit report shouldn’t be a mystery. You have a right to review it anytime and you may request one free credit report every year. It’s a good idea to review it so you’re aware of what your creditors see. Request your free report at www.annualcreditreport.com or call 1-877-322-8228.
And the effect of your credit card?
So how do Credit Cards affect your credit score? How many you have, how much your limit is on each one, whether you pay them on time, and whether you pay the balance in full each month is part of the complex formula used to come up with that all-important 3 digit score.
New rules governing credit cards aimed specifically at protecting students went into effect in February 2010. Credit card companies are now prohibited from issuing cards to anyone under age 18, and those under 21 need either an adult co-signer or proof of income. There are other provisions in the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act that cover consumers—such as advance notice of changes, more time to make payments and terms that are easier to understand—and all apply to students as well.
Author: Susan Larsen is a Vice President and Branch Manager at American West Bank