Why Having a Good Credit Score is Important

Your credit score represents your financial health and proves to lenders your ability to manage debts. Showing lenders you can save money, pay debts on time, and establish a trustworthy credit history helps you borrow money.

The major credit bureaus score each person based on their credit payment history. There are more than one scoring system, but they often range from 300 to 850 in rating.

The Effect Your Credit Score Can Have On Your Life

Your credit score can impact your life in many ways, including:

  • Average to excellent credit scores can give you access to auto loans, mortgages, personal loans, and credit cards with lower interest rates.
  • A fair credit score can typically get you credit services that you need, but with higher interest rates.
  • While a poor credit score will usually get you declined for most credit cards, unless you apply for a secured credit card and provide a security deposit.

If you’re planning to buy a house, new car, or anything else that you can’t pay upfront, increasing your credit score should be your first step. If your credit score is too low, you might be declined for loans or end up paying sky high interest rates.

If you’re going to rent an apartment, landlords will check your credit score before they accept you as a tenant. If you have a bad credit score, landlords may feel that you’re a risky investment and you could have a hard time finding an apartment.

Simply put, the higher your score, the lower the interest rates and the better your chances of being approved for loans, credit cards, and other credit related products.

To give you an idea of how credit scores are weighed when credit checks are done, we’ve broken down the stats. Here you will find ranges for both FICO score ranges and VantageScore credit scoring:

What is a Good FICO Score?

FICO is one of the major consumer credit scoring agencies. Founded in 1956 and based in San Jose, CA, FICO has been providing its general-purpose FICO score since 1989. FICO scores are based on credit reports as well as other statistics like credit utilization ratio.

Infographic about FICO scores
Poor Fair AverageVery GoodExcellent
FICO Score300 – 579580 – 669670 – 739740 – 799800 – 850

What is a Good VantageScore?

VantageScore is an alternative consumer credit-scoring model that was created by and is a registered trademark of the three major credit bureaus: Equifax, Experian and TransUnion. The scoring system is kept separate from the credit bureaus.

The current model, VantageScore 4.0, debuted in 2017. It retained many of the updates from VantageScore 3.0 that consumers preferred. These features included changing the scale to fit the more comfortable 300 to 850 scoring range.

Infographic about the VantageScore
Poor Fair Good Excellent
300 -579580 – 669661 – 780781 – 850

A Closer Look at Factors That Affect Your Credit Score

The information that sends your credit score up or down is different for each scoring system. But all credit scores, no matter the model, have these factors in common:

  • Credit utilization rate
  • Type, number and age of credit accounts
  • Total debt
  • Public records such as a bankruptcy
  • How many new credit accounts you’ve recently opened
  • Number of inquiries for your credit report

Factors Specific to FICO

According to Experian, there are some factors that FICO weighs heavier than other scoring systems. Those factors are:

  • Most influential: Payment history on loans and credit cards
  • Highly influential: Total debt and amounts owed
  • Moderately influential: Length of credit history

Factors Specific to VantageScore

Also according to Experian, there are some factors that VantageScore weights heavier than other scoring systems. Those factors are:

  • Most influential: Payment history
  • Highly influential: Age and type of credit, percent of credit limit used
  • Moderately influential: Total balances and debt

Steps You Can Take to Improve Your Credit Score

You should aim to be in the good to excellent credit score ranges. At those ranges you have access to the lowest interest rates and the largest variety of credit products. If you’re in the poor, fair, or average credit score ranges, you should work on building your credit. To do this you can start with secured credit cards or cards with lower credit limits.

Also pay attention to how much you use the card, also called your credit utilization rate. Make sure you only utilize up to 30% of your credit limit. And when you do use your credit card always pay your credit card balance in full and on time to build your credit score.

If you make timely payments and use your credit card wisely, your credit score will gradually increase. This means you pay less interest on loans and credit cards in the future.

People Also Read

Continental Finance is one of America’s leading marketers and servicers of credit cards for people with less-than-perfect credit. Learn more by visiting ContinentalFinance.net

Should You Get a Second Credit Card?

What are the advantages of having a second credit card?

This article will cover:

  • What the best second credit card is for you
  • Does getting a second credit card hurt credit score
  • Tips for choosing another card

You’ve finally started to rebuild your credit score. Things are going great. And then you see it in the mailbox: An offer for a brand new credit card!

You’ve been pre-approved or pre-selected to receive a whole new line of credit. But is that wise? Will it help? You immediately wonder, “Should I get another credit card?”

We start by covering the basics of getting a second card. No matter your reason for considering another credit card, the benefits of doing so all come down to the same couple of pros:

  • The most important reason is a second card, if managed properly, can improve your credit score and have a long term positive impact on your credit history.
  • The next most often cited reason is that another card can act as a backup to your primary card in case of an emergency.
  • And the third most common reason for getting a second card is it can diversify your credit pool.
How a second card improves your credit score

How a Second Card Improves Your Credit Score

There are potential benefits to having more cards. Having two or more cards is a strong signal to credit card issuers that you can manage your debt, personal finances and credit successfully.

Showing you can manage your finances and establishing a good payment history gives lenders confidence and that may lead to favorable opportunities, such as credit limit increases.

Also, if you manage to pay down your balance on both cards, you will automatically improve your credit score by the next month it gets calculated. This improvement happens because you improve your credit utilization ratio.

How a second card helps in emergencies

How a Second Card Helps in Emergencies

This may seem obvious, but it’s still an important feature. If you have multiple cards, then you have an emergency option if something happens to your primary card. 

This really comes in handy when you travel. A lost card when you are on vacation can create a personal finance crisis. But having that other option can tide you over until your credit card issuer gets you a replacement plastic.

How a second card helps diversify your credit

How a Second Card Helps Diversify Your Credit

One benefit of a second credit card that should not be overlooked is the diversity it brings to your credit history. 

Most of the time people get caught up in the details. They’re looking at a card’s interest rate or its annual fee or its foreign transactions fees. 

But having a second card has the ability to provide diversity to your credit report. Having a variety of types of credit, including travel rewards cards, cash back rewards programs, and charge cards, shows a credit issuer that you can maintain good spending habits through a variety of different lending channels.

What are the pitfalls of a second credit card?

What are the Pitfalls of a Second Credit Card?

Now that you know how a second card can benefit you, take a moment before jumping at that credit card offer in your mailbox to consider the problems a second card can create.

The offers you receive in the mail, even with transparent advertiser disclosures, may not be telling you the whole story. There are some valid reasons you should avoid getting a second or third or even fourth credit card.

Those reasons include:

  • Another card can create problems paying your bills on time.
  • Another card can create more debt problems after you balance transfer card debt.
  • Another card can create obstacles when you are looking to make a major purchase like a car or home.
How another card creates problems with paying bills

How Another Card Creates Problems with Bills

Remember how above we spoke about how that second and third card can help with your credit utilization because it gives you more available credit? The opposite is true. 

Multiple credit cards can create problems for you because you have more available credit and if you use that credit up, you may sink further into debt. 

A lower credit limit means your ability to consistently pay off your credit balance is easier. Sometimes less really is more!

How another card creates problems with managing debt

How Another Card Creates Debt Problems

Some of these credit card offers you receive in the mail may contain very tempting terms, including a low introductory rate or 0 percent interest for a period of time. That’s when you start considering taking your debt on one card, and transferring the balance to this new card.

But as with the previous obstacle, if you can’t pay down that debt before that term’s period of time ends, you’re run the risk of being stuck with more debt than before.

How another card creates problems with big purchases

How Another Card Creates Purchase Problems

If you’re looking to make a big purchase, such as a new automobile or a new home, you should be wary of adding new credit cards to your finances. The bigger purchases will show up as new lines of credit on your credit report and will take up a very big chunk of your credit history moving forward.

It might work better for you if you wait a year before opening a new line of credit. That big purchase may no longer be seen as a new line of credit by that time.

What is the best second card to choose?

What is the Best Second Card to Choose?

You have a lot of options in front of you. It could be a Surge Card, or a FIT Mastercard, or a Discover It Card that you are trying to decide between.

First of all realize there’s no one single correct answer. What you want to do is choose the card that is best for you and your personal finances. So what you do is you take the offers, put them in a pile and start looking at what terms you are being offered.

Tips to Help You Choose a Second Card

  • Have a goal in mind. You want to know what your expectations are. Determine what you are looking to achieve by having a second card. That will help you define which offer is best.
  • Pay attention to the APR and annual fees. Fees are a big part of how credit card issuers make their money day in and day out. But if you pay attention to your terms and conditions there is a good chance you will be able to find a second card that has better fees and terms than your previous card.
  • Consider any rewards programs you were offered. If you have raised your credit score diligently over the period you had your first card, your second card could come with a variety of options including travel rewards and cash back bonus rewards. Even at 1% to 3% rates, a cash back bonus program can help you save each month on your bills including groceries, gas, and restaurant purchases.
  • Create a relationship with a new financial institution or lender. A second card can be obtained through a completely different bank or credit issuer. And that can give you a chance to create a positive credit history with a brand new group.
Conclusion: Sometimes two cards are better than one

In Conclusion

Getting multiple credit cards can help you build your credit and improve your score. But you need to make the decision very carefully and then use your second card wisely. Remember that you are managing your debt and your finances no matter how many pieces of plastic you have in your wallet. 

Stay diligent and be responsible with your bills and your purchases. 

If you stick to the path that you were when you started your credit building journey, then a second card will help you achieve even better results as your grow your credit score.

People Also Read

Continental Finance is one of America’s leading marketers and servicers of credit cards for people with less-than-perfect credit. Learn more by visiting ContinentalFinance.net