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Credit Card Applications » News » Other » Five Common Questions New Credit Cardholders Ask

Five Common Questions New Credit Cardholders Ask

April 11, 2010 | Updated on April 11, 2010
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The content is accurate at the time of publication and is subject to change.

Many young people, especially those falling in the 20s age bracket, are keen in knowing about credit scores. They know that a good score or rating is vital to enable one to make big purchases, such as buying a home, car, etc. New cardholders want to know how to keep good credit scores and how to avoid pitfalls that could ruin a credit standing.

Below are five commonly asked questions of fairly new credit cardholders, with particular emphasis on FICO scores. FICO scores range from 300 to 850, with the rule being the higher up in the scale, the better.

1) How can one establish a FICO score and a credit history?

It is essential to have at least one credit account, such as an auto loan, credit card, mortgage and auto loan, open for six months at a minimum. Upon the sixth month of the credit account, credit and payment activities will be reported to the three main bureaus, Equifax, TransUnion, and Experian. Bills for utilities, such as cable, electricity, and water are not reported to agencies.

Under law, a client is entitled to receive a free credit report from each of the three main bureaus each year. It is possible to request for copies via the Internet, phone, and mail. On the other hand, score copies are not free, and it is possible to get one for as low as $7.95 to as much as $15.95, depending on the vendor.

2) How does card balance affect credit rating?

A rule of thumb is the lower credit card balance, the better. Almost one-third of a FICO score is made up of credit utilization, which is the amount of credit available that have been used. A good benchmark for balance is to use not more than 30% of credit available.

3) How will closing a card account affect credit score or rating?

Closing an old account can have negative implications on a score or rating, by lowering credit to debt ratio. Closing an account will decrease the total amount of credit available.

4) Will credit score dip if checks are done on a credit report?

No. On the other hand, opening new accounts will have negative repercussions on a credit score, so it is best to go easy on acquiring new credit accounts.

5) Will late payments affect score or rating?

Yes. Being late in payments can adversely affect credit score and can set back by as much as 110 points. Always be prompt with payments and pay bills before their due dates come up.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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