Understanding How Credit Card Debt Can Affect Your Credit Score

America has been facing financial difficulties in the past several years. The reason for the financial woes can be attributed mostly to debt. Debt can arise from many different areas such as mortgage loans, student loans and credit cards. Credit cards have for years been a way for people to buy misc. goods and/or services without needing the money up front. This type of consumer spending is what led America to the financial crisis that it faces today.

Credit cards normally charge a reasonable interest rate as long as you pay the balance every month. Conversely, credit cards normally charge outrageous rates when you are late on a payment, sometimes making it impossible for the customer catch up on his or her payments. All the while this is negatively affecting this person’s credit report. A credit report is a numerical assessment of a person’s ability to repay a loan that is not based on a person‘s income. Many credit card companies use this report as a means of determining whether or not they’ll grant customers the card.

Many consumers are unaware of their credit score and don‘t know whether or not they are helping it. The government has made credit reports available to all consumers for free once a year in order to be fair. Credit cards can be a great way to increase your credit rating if you decide to purchase an item and can make the payments on time, every time. In this way you will be able to reap the benefits of having a credit score that will enable you to purchase items of higher value in the future.

Companies that help consumers keep track of their credit report can be a good way to help them become financially responsible. The reason for this is if you have someone that is constantly keeping track of your credit report and whether good or bad it would be easier to go about taking care of unpaid debt. For instance, if your credit score was low it would probably because of poor decisions in the past in regards to credit decisions.

Maybe paying credit card payments late, not paying the bill on a mobile phone service, or becoming delinquent on any kind of loan will negatively affect your credit score. The credit report would detail what areas in your credit file need help in order to progress the credit score to a level more suitable to qualifying for future credit. A good credit repair company could tell you what type of steps you can take in order to create a better score.

If you get your credit report and your credit score is to your liking, a credit monitoring company would be able to aid you in maintaining such a score. Steps to be taken can be to take a small loan in your name and gradually pay back the loan over the course of a year. This type of financial responsibility will show up in a credit report.

Credit reports are normally given out by three main agencies, Equifax, Experian and TransUnion. Most credit reporting agencies base their scores on FICO which is created by Fair Isaacs Cooperation. Some financial institutions use other means of determining whether or not the person will be eligible for the financial services in which they offer. This means that even if your FICO score maybe good that you may still not get approved for the financial service in wish you hope to receive.

If you have not checked your credit score in the recent past, now would be a good time to do so. It is becoming more and more difficult to get credit extended to you based on the current state of the economy and unless you have a high enough score you probably don’t stand a chance of qualifying for anything with a decent interest rate. Get your free credit report and score online and keep track of building better credit. You will be so happy you did.

 

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