January 12,2009
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Fearing Fear Itself, Pt.2 –
– Be part of history.Applying for credit will slam my existing credit rating: This should only be a concern in the extreme. A single credit card application will typically affect a reduction of only five FICO Points. This is over a range of 300 to 850 points. Averaging all American credit card holders together comes up with a FICO Score of 723. So, if you're anywhere near average, these little five FICO points only constitute about 1 percent of your score. Not much difference at all. But, be advised that having too many credit card applications in a short amount of time forms a more serious pattern. You may be placed in the risk category "this person is financially floundering and behaving in desperately. Better stay away." Just means don't go wild, it spooks creditors.
"Oh my God, I have no credit history!": Unless you're up against the wall for an immediate loan for a large amount, not to worry. While it's true that lenders rely heavily on credit history, you can get in the game any time. It's easy. Just open up a credit card account soon just to get the ball rolling. You may not get the best terms but, who cares? All you have to do is to use the credit card frequently on small things like everyday incidentals. Just make sure you always pay early and pay the debt in full every month if the interest rate is high. In any case, always pay above the minimum and never be late. Time will go by on its own while your FICO Score will continue to rise.
One further note: For those who have an old credit card account but keep the card in the sock drawer just in case, start using it again now. This can prove quite valuable in providing credit history. Use it at least once every five to six months so the lender doesn't close the ‘inactive account'.