Do Store Cards Effect Credit Ratings?
If you shop from the same store every time, and they offer you discounts like birthday rewards, shopping points, and discount cards, then think before you go for one, as they may seem beneficial, but in reality they are not.
The amount of credit that can be given to a company or person without their getting default is called the credit rating. It is very important, and depends upon the borrowing, and repaying history of the borrower. Credit ratings have advantages, as well as disadvantages, when it is good, you can get more credit, because of your good record, but if it is bad, then you are not a responsible debtor, and most probably you will be denied more credit.
Credit ratings are the accumulation of your financial records from the time, you first started you transactions through bank, and they determine whether you have the capacity to repay another potential loan. High interest rate card, especially the store cards are never good for your financial record, as they can ruin your credit rating. Due to the following reasons, the store cards are not for your rating:
Higher Interest Rates
The biggest disadvantage of a store card is that if you have due to be paid, then with the passage of time the interest rates rises exponentially, and rips you off, destroying you financially.
Credit Limits
The credit margins are smaller in case of store cards; this increases the debt ratio as the credit available to you in not as much as the debt, therefore wiping out your good financial record.
Extra Cost
Credit cards whether store cards, or others debt should be paid immediately, the reason being if not paid on time the interest rate on the credit will rise, and in case of store cards, it hikes exponentially. Stores first try to garb the customer by making them permanent through a store card, and then the charging higher interest rate is their potential profit.
Not only store cards, but also even credit cards decrease your credit rating, having many credit cards means increase in your debt ratio (the amount you owe over the total credit available). More debt available to you seems a good prospect, but it might be turned against you, and more credit denied to you.
The best tip is to avoid store cards, and if not, then avoid credit buying on those cards, and still if you do, pay off the credit within the month. The cards that you have the longest history of regular payments with will help your rating. If you are not paying off a store card each month, your balance can become dangerously close to your limit, which makes you susceptible to a lower credit score.
Edward Woodwards is a financial consultant. You can take iva help and solutions to your debt problems. Find out more information at his recommended site http://www.iva.org.uk.
