What is a credit score?
A credit score is derived from a credit report. A credit report is a record of an individual's credit activity. It lists any credit card accounts or loans a consumer may have, the balances, and how regularly they make their payments. It also shows any action that has been taken against them because of unpaid or late bills.
The scores are used to evaluate a person's creditworthiness and the risk they pose to lenders.
How are credit scores calculated?
Credit scores are calculated using a lot of different data from your credit report by the major consumer reporting agencies. There are three major credit bureaus that operate nationwide. An individual's credit rating is drawn from their credit report. The most common used system for credit was developed by FICO. Here are the factors considered in the report:
- 35% Credit History
- 30% How much do you owe
- 15% Length of credit history
- 10% New credit
- 10% Types of credit used
How important is a person's credit score?
A credit score is one of the most important numbers in a person's life. Individuals are ranked on a sliding scale regarding creditworthiness. A credit score ranges from 330 to 830. Traditionally, the less risk (higher score) a person represents based on credit history, the more access they will have to credit at lower prices. The higher the risk (lower score) means fewer options (if any) to access credit and it will be priced accordingly.
Is damaged credit a growing problem in America?
Damaged credit can happen to anyone as a result of unemployment, unexpected medical expenses, divorce or other circumstances. The fact is that there are a number of individuals with damaged credit. The National Bankruptcy Research Center reported overall consumer filings in 2012 had reached 1,311,602.
According to FICO, a global standard for measuring credit risk in banking, mortgage, credit card, auto and retail industries, the average national credit score is 640. Most lenders would view a person as having bad credit if they fall below 600. It is increasingly difficult for individuals with damaged credit (especially for those with a score under 620) to find access to credit, let alone the tools to help them build their credit history.
How can a person improve their credit score?
To improve or rebuild a credit score, a person has to take personal responsibility for it and establish solid financial habits to handle their credit wisely. Here is a partial list of some of the actions that can help:
- -Pay bills on time
- -If you have missed payments, get current and stay current
- -Monitoring and resolving any inaccurate credit report information
How can the credit cards serviced by PREMIER Bankcard help someone with bad credit?
The primary purpose is to provide individuals with damaged credit histories an avenue to obtain credit and to provide a tool to help them demonstrate positive financial patterns. By making payments on time with us and all your creditors and keeping your balances low relative to the credit limit you may be able to rebuild your credit history. Credit lines are kept low (usually around $300) so that these individuals are not put in a position to further hinder their financial progress. We report cardholder payment information to the major consumer reporting agencies.
Why are the fees and interest rates charged on the credit cards serviced by PREMIER Bankcard higher than more traditional cards?
All of our products are priced based on the risk associated with offering the product to individuals with damaged credit, many who find themselves at the lower end of the credit scale.
The approach is much like high-risk auto insurance. If you have a bad driving record, you have to pay more and once your driving record has improved, your premiums can come down. People who have damaged credit histories pay a higher cost for credit. If they demonstrate positive financial practices, after awhile their credit score can improve and their cost of borrowing can come down dramatically.
How do the credit cards serviced by PREMIER Bankcard compare to other ones marketed to individuals with damaged credit?
There are several credit card companies that market to individuals with damaged credit. These cards can be unsecured or secured. Unsecured cards are issued without any security requirement. With a secured credit card the individual must meet certain criteria in addition to putting money into a savings account or certificate of deposit within the credit card account. This type of card presents a lot less risk to the lender, therefore the upfront fees and terms are usually lower. First PREMIER Bank can also offer secured credit cards, however millions of Americans at the lower end of the credit scale cannot meet the criteria or afford to put dollars into a savings account to obtain one of these credit cards.
A person's credit score will determine in large part the cost associated with carrying a credit card. The difference between a 620 and a 615 score could limit the choices a person might have, as well as the cost of the card.
Due to the increasing regulation that affects companies' ability to price for risk, the options available continue to decrease for individuals at the lower end of the credit scale.
What if a person gets your credit card and doesn't want it?
We go to great lengths to provide our customers with full disclosure and a refund of fees before the card is used if not satisfied.