Credit Card Use Largest Factor In Credit Rating, Says CFPB

By Cornelius Nunev


The CFPB has launched a brand new study on credit reports that figure out a consumers' capability to get credit. According to the report, how a customer utilizes his or her credit card is the most telling aspect in deciding on a score.

Prove credit history

Most people are not surprised by the truth that credit scores are impacted by credit cards. There are ways to use your card in order to make it easier next time you need a loan for your car or your mortgage.

Richard Cordray is the CFPB director. He explained: "Credit cards are given great weight in credit profiles -- a lesson that consumers could end up learning the hard way."

Charge card businesses provide more than half of the data that helps support a credit rating.

It is simple to fall into a debt spiral when consumers use charge cards irresponsibly. When customers go to take out a mortgage in the future, they might end up having to pay more due to the black mark on their record, according to Cordray. He explained that many consumers will be getting retailer credit cards during the season to get discounts on gift purchases, which is perfectly alright as long as the card is used responsible.

Recession and credit card use

However, reigning in charge card use has proven not the easiest of tasks for many American consumers during the economic downturn. Stagnant wages, high unemployment and increasing prices have conspired to force more and more Americans into using their charge cards for daily expenditures, and not just for emergency situations or occasional splurges.

The CRL said Wed that around 40 percent of low- and middle-income families routinely use plastic to meet daily needs, such as food, rent and clothing. So evidently the teaching point from the CPFB report is one that Americans would do well to take to heart.

Credit card Act

One the other hand, many Americans have managed to lower high charge card balances in the recession's aftermath. Much of that, however, could be attributed to charge card reforms, say some analysts. The Credit card Accountability Responsibility and Disclosure Act of 2009 eliminated or restricted many predatory lending practices, such as high penalties and fuzzy fee structures.

Stay informed

Less than 20 percent of customers actually get their credit rating regularly, according to the CFPB. Customers can point out errors or fraud more very easily and fix any troubles before it shows up when applying for a large loan if they are keeping track of their credit. Americans are obviously not doing enough with regards to staying informed.




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