Effects of Credit Cards & Loans on Your Credit Report

 


Visitors: 406

Effects of credit cards and loan accounts can be positive. For example, retail charge cards can be a good way to establish or improve your credit. Because the card limits are generally low, you may pose little risk to the creditor. So, you may be approved with little or no credit history. Using these cards responsibly may help establish your creditworthiness for more significant credit (such as a vehicle loan or a mortgage) in the future. Unfortunately, the interest rate on charge cards is much higher than regular credit cards because of the higher risk involved. Use these types of cards sparingly.

Like retail charge cards, secured cards can be the first step toward repairing your credit history. With secured credit cards, you are required to deposit money with the issuer of the secured card that partially or completely covers the amount you may charge on your card. If you default on your card payments, the creditor may withdraw the money you have on deposit to repay the debt. In some cases, however, the card may be converted to an unsecured card if you make satisfactory payments for a specified length of time. Your secured card will help you establish or improve your credit only if you make the payments in a timely manner. Even though you have money on deposit with the card issuer to secure the debt, you must pay at least the monthly minimum to keep your credit history from looking even worse.

On the other hand, loans and credit cards can have a negative impact . First of all, applications for credit are reported to credit bureaus as an “inquiry” and remain on your report for 24 months. Lenders may become suspicious if they see numerous credit applications within a short period of time. Fearing that you may become overextended on the amount of debt you can handle, they may deny you credit simply because you've applied for too much.

Furthermore, late and missed payments will appear on your credit report. For each credit account you have, your credit report will contain a detailed history of your payment record over the last 12 to 24 months. Derogatory information may remain there for seven years or longer, depending on the type of notation. Each time you're late making your credit card payment or miss a payment, you're undermining your credit history and weakening your chance to obtain loans in the future.

Finally, all open accounts with no balances also appear on your credit report, even if you don't use them. Because they increase your potential debt-to-income ratio, open but currently unused accounts can prevent you from obtaining new credit. To prevent this situation, get a copy of your credit report. If your report shows that you have cards you no longer use, call the issuing companies to cancel them.

These are just a few ways credit applications and accounts can affect your credit. To learn more, visit http://www.directlendingsolutions.com

(502)

Article Source:


 
Rate this Article: 
 
An Online Report For Student Credit Cards is Now Easily Obtainable
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

Refinance & Bad Credit Mortgage Advice: Correcting Your Credit Report

by: Art Nourian (June 29, 2006) 
(Finance/Credit)

Bad Credit Payday Loans and Credit Cards Use Them to Improve Your Credit ..

by: Mary Wise (August 20, 2008) 
(Finance/PayDay Loans)

Rebuild & Keep Good Credit Ratings by Understanding Your Credit Cards

by: David Hall (August 25, 2005) 
(Finance/Credit)

Free Credit Report - The Best Way to Check on Your Credit Score While Applying ..

by: Bob Randooke (December 17, 2008) 
(Finance/Credit Tips)

Fast Unemployment Loans And No Credit History Check Credit Cards

by: Terry Glass (March 31, 2008) 
(Finance/Loans)

The Pros and Cons of Credit Cards and Loans For Those With Damaged Credit

by: Brendan Flushing (August 26, 2008) 
(Finance/Loans)

Clean Credit Report Get a Clean Credit Report and Raise Your Credit Score 100 ..

by: Benjamin Robert Ehinger (July 31, 2008) 
(Finance/Credit)

Bad Credit Credit Card - How To Increase Your Credit Score With Credit Cards

by: Carrie Reeder (October 04, 2005) 
(Finance/Loans)

Keep Your Credit History Clean - Remove A Negative Credit Record From Credit ..

by: Jeffrey Broobin (February 10, 2005) 
(Finance/Credit)

An Online Report For Student Credit Cards is Now Easily Obtainable

by: Donald Renal (June 19, 2008) 
(Finance/Credit Tips)