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The Effects of Retail Store Credit Cards on FICO Score or Credit Rating

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Multiple credit probe by a consumer attempting to open a new credit line such as retail credit card or retail store account can affect FICO score or Credit Rating. Holiday shoppers are usually entice with the idea of applying for a retail credit card with the promise of getting a 10 to 20 percent off. Retailers like Best Buy, JC Penny, Sears, Shell gas cards, Home Depot and Even Amazon entice customers to apply for their retail store cards with the promise of an extra 10 percent discount.

Consumer are easily lured towards the interest free financing, particularly buying during the Christmas season when big ticket items are in demand. This decision to apply for a retail card could be disastrous to their credit in the long run. It can have a negative impart on one’s FICO score. An average FICO score ranges from 300 to 800.

how Retail store credit card affect FICO score

Sears Retail Store Card Offer

Simply opening a retail credit card account will lower your FICO score or credit rating. Why? When a consumer fills out a new credit application, they are giving the retail store credit card division the authority to look at their credit report. This inquiry will be posted on their credit report.

Every inquiry to evaluate your credit worthiness will remain on your credit report for a year and will lower your FICO score. In addition, balances on retail credit cards will negatively affect FICO scores particularly with balances exceeds the 50 percent of credit limit. Many credit reporting experts advises that balances should not exceed 30 percent of limit.

However, when the credit report is taken can make all the difference. Retail credit card companies take snapshot of your account and send them to the credit report bureaus: Experian, Transunion and Equifax. If the bill is paid, the credit report will reflect this, and will help lead your FICO score higher. If it is not, the effect will be negative.

How to use Retail Credit Cards to Improve FICO score or Credit Rating

If you have bad credit or poor credit, meaning that your FICO score is in the sub-prime category or below 650, you can use retail credit card accounts to help boast your FICO score. If you already have credit accounts, please do not close them.

If you close those retail credit accounts, it will increase your utilization ratio, which is the amount of debt you owe or have outstanding divided by the total all your store credit limits. First, you should inquiry if the retail stores where you have cards report to the credit agencies.

If they do, great. You can use the cards to help rebuild your credit / FICO score. You just have to pay for your bills on time and never go over the 30 percent balance threshold. In addition, many retail cards have high interest, so it would be beneficial to pay all your balances at the end of the pay period .

To help boast your FICO even further you may apply for a secured credit card. The prerequisite of getting a secured card is that you most deposit your own money as collateral. Just ensure that the credit card company reports to all credit credit agencies.


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