How
do I start establishing good credit? In
short, you can establish a good credit history by consistently paying your bills
on time. Remember, to establish a good credit rating you should always pay at
least the minimum amount due every month by the due date. Go
to Establishing
Credit for more information about how
to establish your credit... [back
to top]
What
is a credit report and what's it used for? When
you apply for credit, the lender reviews your credit report before approving your
application. Think of a credit report as a resume. It details how well you have
paid your bills and used financial tools such as credit cards and checks. Just
like a report card or a resume, a credit report is used to document your performance;
in this case, your financial performance. The
report details how well you pay your bills, bank loans and credit card purchases.
It also can indicate if you have abused financial tools such as checking accounts
and debit cards. Even debts of small amounts, if not paid on time, can hurt your
credit standing. The three major credit agencies
which monitor this activity are Equifax,
Experian, and TransUnion.
These agencies, also called "bureaus," collect and report information about your
financial habits and put the information into a credit report. Below
is a list of information that can appear on a credit report: - Your
name, Social Security number, birth date and current and previous addresses.
- Information about your employers, both current and previous.
- Your payment history with major credit cards, department
store charge accounts and loan payments.
- Your
payment history with utility and telephone services.
- A
list of your accounts (if any) that have been referred to a collection agency.
- Inquiries made about your credit history that have been
made over the past several years, and whether or not you were granted credit.
- Public record information: such as bankruptcies, foreclosures,
and tax problems.
Information on a credit
report can remain for many years. (This is often referred to as your "credit history.")
Since this report is used by others to make important decisions affecting you,
it is important to review your credit report for accuracy once a year. *
See our Credit Report section for more information. [back
to top]
Important
terms you should understand! The following
credit industry terms are broadly defined below. But they are no substitute for
the detailed definitions provided in an Account Agreement, Supplemental Disclosure,
or Terms and Conditions. Always read the specific Disclosures for any credit account
issued to you. Annual Fee
A bank
charge for use of a credit card each year and billed directly on the customer's
monthly statement. Annual Percentage Rate
(APR)
The interest rate reflecting the total yearly cost of the interest
on a loan, expressed as a percentage rate. Under the federal Truth in Lending
Act, it must be calculated in a standard way to allow consumers to make "apples-to-apples"comparisons
of lending terms. Authorization
An
Authorization occurs when you present your card or account number to a merchant
for payment. An authorization reserves the purchase amount against your available
credit to ensure that the credit is available at the time the transaction posts
to your account. Average Daily Balance
This is a method by which many creditors calculate Finance Charges. Adding each
day's balance and dividing that total by the number of days in a Billing Cycle
determines an Average Daily Balance. The Average Daily Balance is typically multiplied
by the Periodic Annual Percentage Rate in order to calculate the amount of Finance
Charges assessed on an account. Available
Credit
Available Credit is the amount of credit you have available to
use for Purchases, Balance Transfers and Cash Advances. Automated
Teller Machines (ATMs)
ATMs are self-service machines that dispense cash
and process deposits. Balance Transfer (BTs)
A Balance Transfer is the process of transferring a balance from one credit account
to another. Billing Cycle (Billing Period)
The Billing Cycle is the period between billings for products and services - usually
a month. Carrying a Balance
Carrying
a Balance means the balance revolves on an account from one month to another.
When a cardholder carries a balance he/she does not pay the balance in full every
month. Cash Advance
A Cash Advance
allows you to obtain cash from your credit card account. Please note there may
be restrictions on the amount you may withdraw. Typically, a Cash Advance is obtained
through a financial institution or an Automated Teller Machine (ATM). Cash
Advance Fee
A Cash Advance Fee is a charge by the bank for using a credit
card to obtain cash. This fee can be stated in terms of a flat per-transaction
fee or a percentage of the amount of the Cash Advance. Cash
Advance Limit
The Cash Advance Limit is the established limit to which
cardholders can withdraw cash from their accounts. This limit is typically established
as a percentage of the Credit Line. Credit
Payment Insurance
Credit Payment Insurance is a credit protection service
offered by some creditors to their customers. It assists customers in maintaining
a good credit rating in times of financial difficulty. Credit
A Credit on your statement reflects any monetary transaction other than a payment
that decreases your Outstanding Balance. Credit
Limit (Credit Line)
The Credit Limit is the total amount of credit extended
to the customer by the lender. Credit Reporting
Agency (Credit Bureau)
A Credit Reporting Agency compiles data on consumers'
credit payment history. Trans Union, Equifax, and Experian are the three major
Credit Reporting Agencies in the United States. Credit
Report
The Credit Report is a critical factor in credit scoring systems
that lenders use to issue credit cards, mortgages, or other loans. A Credit Report
contains information regarding a customer's payment history and comes from a Credit
Reporting Agency. Creditor (Card Issuer)
A Creditor is an entity to whom money is owed. Current
Balance
The Current Balance is the total amount of credit spent on Purchases,
Balance Transfers, and Cash Advances. This balance may include Finance Charges
and fees. Daily Periodic Rate
The
Daily Periodic Rate is used to calculate the amount of Finance Charges assessed
on an account. It is typically calculated by dividing the Annual Percentage Rate
by 365. Delinquency
A Delinquency
means that payment is overdue on an account. Finance
Charge
Finance Charge is a fee for using credit. It is comprised of interest
charges and other fees. Fixed Interest Rate
A rate of interest charged on an account. This rate is in effect for the life
of the loan, provided the account remains in good standing. This rate will not
fluctuate based on the Prime Lending Rate. Grace
Period
If the cardholder does not carry a balance, the Grace Period is
the interest-free period of time a lender allows between the transaction date
and the billing date. The standard Grace Period is usually between 20 to 30 days. Introductory
Interest Rate
A rate of interest charged on an account for a specific,
limited period of time. This rate is typically lower than the Ongoing Rate and
is used by the creditor as an incentive. Late
Fee
A Late Fee is a charge to your account if the minimum payment due
does not reach the lender by the payment due date. Minimum
Payment Due
The Minimum Payment Due is the smallest amount you
must pay each month to keep your account in good standing. Your minimum payment
can vary from month to month based on your current balance and is typically based
on a percentage of the Outstanding Balance. You can always pay more than your
minimum payment. Ongoing Interest Rate
A rate of interest charged on an account for a period of time. This rate can be
either a fixed or Variable Rate. Over Limit
Over Limit refers to the amount of your balance that exceeds your Credit Limit.
If this occurs, an Over Limit Fee will be assessed. Over
Limit Fee
An Over Limit Fee is a charge for exceeding the Credit Limit
on the account. Outstanding Balance
The total amount you owe the creditor. Post
Date
A Post Date is the date that the transaction was debited or credited
to your account. Pre-approved
A credit
offer with a "Pre-approved" status means that a potential customer has
passed the preliminary credit-information screening necessary to obtain credit
with the creditor. Personal Identification
Number (PIN)
A Personal Identification Number (PIN) is a secret number
that identifies you and allows you to perform transactions at ATMs. Prime
Lending Rate
Prime Lending Rate is a variable interest rate that is often
used in calculating the Interest Rate on a credit account. Repricing
Repricing is the act of changing a cardholder's APR. Secured
Card
A Secured Card is a credit card that a cardholder "secures"
with a deposit to ensure payment of the Outstanding Balance if the cardholder
defaults on payment. Secured credit cards are general-purpose credit cards targeted
to customers with imperfect or limited credit histories who do not qualify for
a traditional unsecured credit card loan. Transaction
date
The Transaction Date is the date a transaction was initiated. Variable
Interest Rate
A rate of interest charged on an account. This rate may
change and is typically calculated by adding or subtracting an amount to a base
standard interest rate, usually the Prime Lending Rate.
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