Knowing facts about consumer credit can help you make decisions about using different forms of credit, including loans and credit cards. Creditors use credit scores and information from your credit report to make decisions about loaning you money. Your chances for approval are better when your use of credit matches up favorably with factors such as the national averages for the number of accounts you have and your spending levels.
Types
Most people who have credit have different types of credit obligations, according to the MyFICO website. The site reports that on average, people have a total of 13 credit obligations, including full-featured bank credit cards, department store cards, gas station cards and installment loans. The installment loans could be auto loans, student loans or mortgage loans. According to the site, most people, on average, have nine credit cards and four installment loans.
Time Frame
MyFICO reports that people with credit obligations tend to pay their bills on time. According to the site, less than half of the people with credit have ever been reported to the credit bureaus as 30 or more days late on a payment. Only three of 10 have ever been 60 days late on a payment. Less than 20 percent have defaulted on a loan or credit card.
Considerations
Many people enjoy the flexibility provided by credit, but few charge the maximum amounts on their cards, according to MyFICO. The site reports that the typical credit card holder has credit lines totaling about $19,000 on all credit cards combined. However, the site reports that more than half the people with credit cards are using less than 30 percent of their total credit limit.
Expert Insight
A notation, called an "inquiry" is made on your credit report each time you apply for credit. MyFICO reports that on average, people using credit apply for new credit only once a year.
Misconceptions
A poor credit score or a negative entry on your credit report will not hurt your credit forever, according to MyFICO. The site reports that your credit score, which ranges from 300 to 850, is only a "snapshot" of your creditworthiness at a particular point in time. Past credit problems will impact your score less as time passes, the site reports.
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