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Many people are unaware of what a credit score actually means. In fact, a survey of 1,000 Americans taken in September 2004 demonstrated that only one third of people knew that a credit score was a measurement of how likely a person is to pay off a loan. Having a good credit score is necessary when it comes to applying for loans for cars, mortgages, and credit cards. Furthermore, having a bad credit score can lead to denial of basics such as a phone line in your home. Therefore, it is important for consumers to understand how a credit scores affects them and how it is determined in the first place.

Calculating the Credit Score

In essence, a credit score tracks how well a person incurs debt and how good that person is at paying the bills on time. Businesses, including lending institutions, look for a high score with potential customers because the higher a person’s credit score, the more likely that person is to be responsible with finances and the more that person can be trusted to pay back debts.

A credit score may vary from one credit-reporting agency to the next since they do not all necessarily receive the same information from businesses. Some businesses report to all three of the major reporting agencies, while others may only report to one or two. In addition, the statistical pool used by each agency may vary slightly, leading to a different credit score. All of the agencies, however, utilize the same software when it comes to determining credit scores. Fair Isaac and Company (FICO) develops this software and, therefore, the credit score is often referred to as the FICO score.

Score Factors

A person’s credit score is not static. It changes all the time. Every time a bill is paid on time or late it is reflected on the credit score. In addition, each time a person takes out a new loan or applies for a new credit card, the credit score changes. This is because the credit score is based on the person’s financial history and attempts to make a prediction at how responsible the person will be in the future.

The final score is highly objective and based on statistical data. Points are gained based on specific factors such as late payments, payment history, outstanding debt, and the length of time an account has been open. All of this information is compared to the statistics of people with similar profiles to determine a final credit score.

JP Burkhart recommends that you visit credit score rating scale for more information.

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You may have heard one of your mates boasting that they’ve been approved for a platinum credit card and wondered exactly what all the hullabaloo and fuss is over. Usually, it means that your mate is to be commended for keeping his or her accounts well in order but aside from that, each company that issues cards has different standards and features for their platinum cards.

First, understand that most finance companies that issue credit cards have many different products. Each of them allows you to make purchases on credit, but they each have different features that are unique to that particular card. One may offer a lower interest rate, but trade it off with an annual membership fee, while another may have a slightly higher interest rate and no fee as well as discounts for purchases made a particular merchants. Many of these companies offer a platinum credit card that is loaded with features for their best customers.

Each company’s platinum credit card is different. In fact, many companies offer more than one version. In general, it has a high spending limit, low interest rates and special features that are designed to make it attractive to those who use often. Those features may include cash back, special rewards, membership in discount clubs or auto clubs and even special rates on automobile or life insurance. They also, however, often have an annual membership fee you must pay in order to keep your card, which may make them less attractive than a less prestigious card.

In other words, even though these types of cards often require impeccable credit, don’t automatically assume that a platinum credit card is the best card for you. Depending on your reason for wanting a credit and your circumstances, another type of credit card may be the better choice. If you’re carrying outstanding balances on other cards for instance, you may do better with a balance transfer card that offers 0% interest rates for balance transfers. You may find that an option that offers a discount on petrol prices is the best choice for you if you travel a lot, or you may prefer something that’s linked to your favourite charity.

Before you make your application, it pays to compare all the features and charges of one against another. At moneyeverything.com you’ll find listings of dozens of credit card offers from all the major companies in the UK. You can compare interest rates, annual fees, cashback and rewards and other incentives online to help you choose the best credit card for you.

Jon Francis has been involved in various areas with the world of finance and has a keen eye for a bargin! He has an in-depth knowledge of the credit card UK market and now helps others get the best from a credit card.

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Thinking about how to use the credit card is the initial step in the choice of a credit card.

When full payment of monthly bill is expected and card features like flyers miles are not in the interest of the customer, a card with a waived annual fee and longer grace period is the best option.

When balance is carried over to the next month, a card with a lower interest rate may be more appealing.

When card will be used for cash advances, the preference can be a card with a lower APR and lower charges on cash advances. Higher APR for cash advances are charged by some cards for cash advances than purchases.

The grace period is the amount of days needed to settle the bill in full without incurring finance charges.

Only new purchases are given grace period. Cash advances as well as balance transfers do not have a grace period rather charged interest at the onset.

When balance is carried over from the previous month, a grace period will not be given for new purchases. Instead, interest will be charged immediately on the moment a purchase is made and on the previous unpaid balance. Information on computing balances for new purchases is included in the application form.

The finance charge is the payment amount for the credit used. It is dependent on the outstanding balance and the APR.

In calculating the outstanding balance, several methods are used by credit card companies. It makes a big difference on the finance charge to be paid by the customer.

A minimum finance charge is given by some credit cards. The minimum fee may still be charged even if there is a lesser finance charge. It is only applied when a finance charge is to be paid meaning there is a previous balance from the last billing cycle.

Several kinds of cards are offered by many credit card companies:

Secured cards entails deposit as security. The higher the deposit, the higher is the credit limit. It is usually offered to people who have previous credit problems or limited records.

Regular cards, do not entail security deposits and with minimal features. They have higher limits on credit compared to secured cards but lesser credit limits than premium cards.

Premium cards (gold, platinum, titanium), provide higher credit limits and additional features such as warranties on products, insurance on travel and emergency services.

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About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

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