The Main Problems With Credit Cards Come With Their Misuse

Category: Finance, Credit.

Credit card usage is on the rise, according to a report released this week by the well- known credit- tracking company, Experian.

Texas isn' t doing so bad, ranking below the, though national average for the number of cards per resident, the percentage of those who own more than ten cards, and the percentage of those using fifty percent or more of their credit limits. More Americans have more cards, and heavy users are just getting heavier. Texas residents had an average of 3 cards each, and just under eleven percent owned ten or more. That's pretty good, considering that the average American holds four cards, ten percent have at least ten of them, and fourteen percent are using fifty percent, of their credit, or more limits. Forty- four percent in the study had more than two cards, and 19% were using half or more of their available credit. New Hampshire ranked the highest for the average number of cards( 3) , the number of those who owned two or more cards( 64% ), and the percentage of those who had ten or more of them( 23% ).

Each state was given its own statistics, as well as being a part of the national averages. Experian's study was conducted by randomly pulling 2 of their 215 million credit files. Credit scores were also analyzed using Experian's own" PLUS" system, though there are many systems in use- - including the most popular, which was created, FICO by Fair Isaac. Twenty to thirty factors affect credit score, however- - not just credit card usage. Credit scores, are used by, once analyzed lenders to deny or approve credit and to determine interest rates. These can include total debt load, payment history, type of debt, lines of credit, including those filed, and bankruptcies due to medical bills.

The main problems with credit cards come with their misuse. New England, is the nation, for instance's heaviest credit user, but residents'scores are also, the highest, on average. Balances on cards exceeding sixty- five percent of their limits and poor payment histories count as negatives. It means the holder is not living on his or her income, she says. "Typically, the higher the utilization, the lower the( credit) score. " Those in New England, however, "are paying their bills on time, so their credit scores are not suffering, " said Pete Bolin, senior analyst for Experian. Any debt carried month- to- month is also a bad sign, according to Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School and co- author of The Fragile Middle Class: Americans in Debt. Though the state's overall credit rating seems fine for now, the healthcare crisis may leave residents of Dallas, Austin and other, Houston cities and towns throughout Texas particularly vulnerable to credit ruined by unpaid medical bills, as twenty- five percent of its population is living without health insurance, including twenty- seven percent of its young adults. S. are filed due to illnesses and medical bills, according to another Harvard study.

Credit reports don' t treat medical bills differently from any other debt owed, as evidenced by the fact that half of all bankruptcies in the U. Thirty- eight percent of those who filed for these reasons lost their health insurance at some point during their medical hardships, many as a result of employer- sponsored coverage backing out. The federal office of the Comptroller of the Currency is pressuring banks to double cardholders' minimum payments to four percent in order to weed out high- risk borrowers. Credit cards alone are enough to worry about, especially for those carrying high balances. Many are protesting such a move. Robert D.

Forcing more Americans to file bankruptcy, is not going, after all to solve problems in the housing market, nor the tendency to mismanage credit. Manning, author of Credit Card Nation and director of the Center for Consumer Financial Services at Rochester Institute of Technology in New York, believes the current situation is partially the result of an aggressive and immensely profitable credit card industry, however- - not just the credit card holders themselves. Huge penalties and astronomical interest rates imposed for missed payments don' t help the situation either, and when payments become overwhelming, credit ratings just get worse. Those with poor credit are forced into obtaining several cards with low credit limits and high fees to get what they want, he says. When credit ratings go down, so does the number of those who qualify for large loans, the housing market, and thus- - the decline of which is making big news of late. Save your credit if it's sliding, and maintain good scores if it's not. The best thing to do for now?

Bolin suggests the following: (1) Calculate your next move. These can include auto loans, installment loans, mortgage loans, equity lines of credit, and student loans, credit cards. Before closing credit cards, figure out the, for instance effect on your balance- to- limit ratio. (2) Vary the types of loans you take out. This shows creditors you can handle debt in different types of situations. (3) Make payments on time! If you can pay off your debts every month, do it. No matter the debt load or type, your credit is, without timely payments shot. (4) Limit the use of available credit to sixty- five percent or less. The lower the balance, the better.

Being aware of issues affecting your credit rating, and how that credit may be affected by your healthcare coverage is an important aspect of maintaining control of your life. Zero, is best, of course. How you take care of yourself will certainly affect you as you age, and eventually your wallet, as well.