Things You Should Know About Credit

If you are working and living in your own apartment, you will have more expenses than if you are working and living at home with your parents. The credit departments consider all these factors when deciding to either give you credit or deny you credit. They also use this information to figure out what kind of credit line they will give you if approved.

The system they use in determining all this information is known as the numbering and grading system. Credit card companies use this system to evaluate your personal status as an individual. You receive a certain amount of points for each bit of information you give to them. This is not universal. Each issuing credit card company has a different set of criteria for issuing the points, but rest assured that they all pretty much have the same system. The points are then tallied and then you are either accepted or rejected by the credit card company that you applied for assuming that you have a clean credit history. Today these points are referred to as your FICO score.


Almost everyone who grants credit uses the FICO scores. FICO stands for Fair Isaac Company. I have no idea on where the name came from! A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. It is that simple. The range of scores and this changes is from 400-800. The methods used by FICO are a well kept secret on how exactly they arrive at a score, similar to the algorithm on page rank.

If you are married and both husband and wife are to used the card, the credit history will be reported in both names. After you have received your credit card, you can start to establish a credit history and a FICO score.

Use your card to make purchases that until now would have been delayed because you did not have enough cash to pay for it. It is EXTREMELY IMPORTANT to pay attention to your monthly credit card statements. To keep your credit rating in excellent status, make your payments on time!! You will see that you have the option of paying the minimum amount due or paying the entire balance in full. If you opt to pay the entire balance in full each month, you will not have to pay any interest charges. In reality you will have the good or services free of any interest charges for the periods of time that you pay off the balance in full. This is truly the only way you can save using a credit card. A smart idea for new credit users is to keep a piece of paper wrapped around your credit card and every time you use the card, jot down the amount of the purchase and add it immediately to any previous purchases. This way you know exactly how much you have charged during the month.

Never charge more than you can pay each month. Most department stores have revolving credit accounts. In this type of account you can pay a small part of the total bill owed. Instead of paying the full amount of the bill, you pay a percentage of the balance each month. That payment will include an equal portion of the interest based on the annual percentage rate (APR). Most department stores charge about 21% interest. The interest charges can be a costly addition to your bill. The best way to establish a good credit history is to show the person or company that has provided you the credit, that you can pay your bill as promised and on time each month. Each month that you have made a payment on time, helps you to establish a good credit history. If at some time during the year you need to make a larger than normal purchase, such as a new refrigerator, washer or dryer, then using the revolving credit can be justified. Always try to pay more than the minimum requested payments. If your minimum payment is try to pay or .

If you can do this it will save you on interest charges and reduce your bill faster. You will have demonstrated to your creditor that you are a prudent user of credit.

If you own your own car, you might find it convenient to have an oil company credit card. These credit cards are issued by the major oil companies. Most oil companies no longer issue their own credit cards, what they do is sub contract with a major credit card company to administer the credit operations. MBNA is a prime example of this. The have hundreds of different companies they do this for, but the bottom line is that the debt is owed to MBNA and not XYZ gas company. Of course MBNA gets paid for this.

You can pick up an application at any service station that offers credit. You mail the application to the company and you will be notified by mail whether or not your application was accepted.

There are 3 major credit bureaus, One is Experian Credit Systems, another major system is the Trans Union Credit Systems. The final bureau is the Equifax Credit Bureau. All 3 of theses bureaus account for 95% of all credit granted worldwide. We will talk about these credit bureaus a little bit later on in this e-book.

If you have been using your department store credit card for at least 6 months, you can now use that as a credit reference in the oil companies credit card application. You are now truly beginning to build a credit history. Do not charge on your oil company credit card any more than you would normally pay for cash. Again, keep a slip of paper around the card listing each purchase as you make it.

Paying the bill in full each month for gasoline purchases used to be required by the oil companies. Since the sub contracts came into being this practice has stopped. They do have extended payment plans for major purchases such as new tires, major repairs and gifts items.

If you are a new credit user, you will find that it is very important to keep a record of your purchases to monitor your spending. Remember, interest charges may be deductible as an expense on your income tax return depending on the current IRS Codes. This way you will be able to handle your monthly payments on time and paying the required payment due. Following this procedure over and over will establish you credit history.

To help you control your credit card purchases and payments, you should keep in mind that you should owe no more than 20% of your take home pay.

The next step is to obtain an unsecured Visa or Master Card. These cards are more difficult to obtain. However if you have followed the procedures for establishing a good credit history, after about 1 year of using your department store and gasoline credit cards, you should be able to qualify for an unsecured Visa or Master Card.

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