| Credit Cards and Credit Rating |
| Written by Jonathan Green | |||
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Credit cards are really popular, there is no denying in that, but according to some studies, about 25% of American families do not have a credit card in their house. For some, especially for those that have a reasonable number of credit cards, this might seem a little surprising.
However, it generally happens that credit cards have the unique ability of reproducing themselves at tremendously rapid speeds. If an employed person that is well into the second part of his life does not have a credit card, the chance that he will never have one is pretty high. Instead, if a certain person has already one credit card he will most likely end up having a lot more in the future. Apparently once you get used to them, you will always want more and more. Having more credit cards can be at the same time an advantage and a disadvantage. The advantage is mostly represented by the possible discounts that become available with special cards. Lower interest rates are also something that most people get a new credit card for. The disadvantage is represented by the credit rating score. So what exactly is the credit rating score and how can it affect you? About the credit ratingIn order to predict the way you will behave after getting a new loan, a new credit card or a new contract for a cell phone, and so on, lender companies have established a rating system that calculates an individual score for each client. These scores are known only by the lender, and are never published or offered to clients, even if they demand it.Practically it is a safety measure that companies that lend money take, in order to make sure that their new clients will respect the norms of their contracts and that they can live up to their own requests. Since these scores are different from one bank to the other, it means that if a certain client´s request for a specific product or service is denied by a bank, it does not necessarily mean that it will be denied by every other bank as well. Different establishments have different points of view over what makes a client worthy of a new contract. Apart from deciding what products a person can receive, these scores also dictate other facts such as the loan rates. Overall, a better credit score also means more services and most importantly, better deals. What information a bank stores while deciding the credit rating score Again, the particularities depend from one bank to the other, but generally, three sources of information are used. These are:
There is more to the credit ratingEvery day more and more financial frauds are recorded, and this made banks take special measures to make sure that their clients will not attempt something similar. For this, each bank will not only check if your request is reasonable, but also if it is real. Dedicated anti fraud agencies closely collaborate with banks in order to avoid such problems. This extensive checking of the financial history is done more thoroughly if the sums demanded by the client are higher. If by any chance a client has a bad record and tried to cheat on a previous bank before, the one to which he applies now will most probably know and decline his request, in some cases even handing him to the authorities.Credit rating is not your enemyYou should remember that this credit rating is not something preferential that banks simply use to filter their clients. It is something that appeared as a necessity and that tries to make things better both for the company and for the client. As long as you have a clean record and no former debts you should always be confident that you will obtain the loan that you want, as long as the amount of money involved is reasonable. If, however, for a reason or another you get refused, while you know the facts are on your side, question the bank in order to clarify your situation. Mistakes can always happen. Do not stress things thought, there are other banks around that are just as eager to have a new client.The credit rating is not working against you, and as long as you are punctual in your payments it will not be of any inconvenience.
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