Credit
All about consumer credit
Consumer credit is used to acquire cash, goods or services with a promise to pay later. Credit card companies pay merchants, banks and service providers for the products or services sold, and the consumer pays off the credit card company for his or her purchases. The credit card company profits from the interest that accrues on consumer accounts.
is a vital part of capitalist credit structure. If you have loans, credit cards or a line of credit, your behavior is reported to credit bureaus. A credit bureau tracks not only your spending but also how promptly you repay credit card companies and lenders.
Factors Affecting Your Credit Score
In the United States, your credit score is monitored by three major bureaus: Equifax, TransUnion and Experian. The methods each bureau uses to compute differ slightly, but they are all based on risk assessment models. Basically, your credit score reflects how likely you are to repay debts. There are two types of credit scores: FICO and VantageScore. The FICO scores range from 300 to 850, and VantageScores range from 501 to 990.
If you want to keep your credit score high, or if you want to improve your credit score, there are two things you must do: make outstanding payments promptly, and work to improve your debt-to-credit ratio. If you miss a credit card or a loan payment, the debtor will report the missed payment to the credit bureaus after 30 days. Any accounts that go into delinquent status will send your credit score down.
Consumer credit is heavily affected by your debt-to-credit ratio, as well. This ratio expresses how much of your credit limit is free and how much is being eaten up by debt. For example, if you’ve taken out a $10,000 loan, your debt-to-credit ratio is much better when you only have $1,000 of the loan left to pay off than it is when you have $9,000 left to pay off.
If you never miss payments and you have a low debt-to-credit ratio, your credit score will be good or get better.
How Do I Find My Credit Score?
You can submit a request to Equifax, TransUnion or Experian if you want to learn your credit score or view a report. You are entitled to free credit reports once per year.
Beyond your annual free credit report, you can sign up with services that provide monthly reports on your credit history. These services add value by tracking all the activity on all of your accounts, allowing you to instantly recognize suspicious activity and stop identity theft before it happens.
