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Credit Card and Credit Score Trends

By Sally Maison
Published: Sunday, September 6th, 2009

The number of Americans who use credit cards regularly is increasing. Unfortunately, the number of Americans who fall into poor credit scores is increasing, too.

Credit Card and Credit Score TrendsCredit cards were first used in the United States during the 1920’s when hotel chains and oil companies began issuing them to regular customers. Since then, the credit sector of the US economy has boomed. Banks and credit companies began to create methods that will entice consumers to use their cards as often as possible. The result: credit card debt has steadily increased since the 90’s and personal savings went on an inevitable decline.

Today, average credit scores have plunged to 680, that is 40 points short of what CBS, a television network, says is a good financial score. However, even implications go beyond figures. Low financial score means more difficulty in applying for loans. Because more Americans are finding it harder to acquire refinance loans, most sink into even deeper debt. This cycle goes back to their credit score and it repeats, creating greater financial woes.

According to financial specialists, the popularity of credit cards does not only affect financial scores of consumers. It has also ingrained in them a “credit card mentality.” Americans have become more reliant on debt that they sometimes forget to consider the future effects of their credit decisions in the present.

Credit cards are not the only cause of this decline in the average financial score of Americans. Home financing, auto financing, business financing, employer loans, student loans, and many other credit teasers cause consumers to sink deeper into debt.

Finance and credit expert Leslie Davis suggest solutions that will help consumers bounce back from the credit slump. First, she encourages consumers to avoid late payments and loan defaults. Those negative items affect 1/3 of the total finance score or rating. Second, she tells consumers to avoid pushing their credit to the limit. She also reminds consumers that when applying for a loan, most companies place huge considerations on recent finance history. She says that “numerous recent applications for credit imply that the individual is strapped for cash, and therefore, more of a liability.”

Financial experts advise consumers to keep their balance as low as possible. This means that consumers must limit, if not minimize, the use of their cards. Experts tell consumers to pay in cash when going to the supermarket or dining in a restaurant. There is no limit to the interest rate that a company can charge so consumers are told to be always on their guard.

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