But that only applies to people that have debt, no? Those who want to spend money that they currently do not have?
Mostly, yes, though credit scores can also be checked by organizations offering a monthly payment contract, like apartment rental or cellphone service, partly to determine whether they want you as a customer and partly to calculate a reasonable security deposit. Banks have been known to refuse to open even savings accounts for people with certain problems listed in their report. In addition, the housing market here has become so corrupted by easy long-term loans that it's nearly impossible to purchase a house without one, and your credit rating determines the interest rate.
I do have 3 credit cards myself, one for Europe and two for worldwide, the second one of those as a backup if something happens to the first one, like getting stolen/lost. At the end of the month the money I got from ATMs by using the credit card gets substracted from my account, with a maximum of 2000€. This is preset, and I knew the amount before I got it, different credit card companies offer different amounts. So in America this amount could be higher or lower depending on how often/how well you pay off debt?
This sounds like a cross between a bank card and a credit card. ATMs here accept the former, and both can be used by the same credit card system, but banks here typically process transactions from bank cards within a few business days, and the limit is approximately your current balance, subject to some overdraft protection and/or fees.
Credit cards are not typically associated with a bank account, have an interest rate and credit limit that can be raised or lowered at the whim of the issuing company with sufficient notice, and a minimum monthly payment much lower than that limit. People have been known to get credit card balances into a state where paying off the minimum is insufficient to cover the interest charges, much less reduce the balance.
Has the system not been modified of late to take into account more factors?
Eg i'm pretty sure here in Australia, at least, that if you can even just show bank statements that you've been putting away a certain amount of money every set period and not touching any of it for a long time, that would be just as good as it proves you have means and discipline to pay off debt. Of course that's hearsay, but it makes sense to me.
There are plenty of interesting events that can impact your credit score, including closing accounts and applying for credit (both slightly negative). Saving money on a monthly basis doesn't seem to help directly, but having a fair amount in an account might. Having a consistent paycheck helps even more, but might not be reflected in the score itself.
There's a national agency that tracks everyone's credit ratings, and everyone who is considering giving you a loan or credit card or anything like that will look at that number as the main factor in their decision. You can improve the rating by just paying your bills on time, but it can be faster to build it higher if you have a credit card, I guess. Everyone gets a credit score, but if you've never done anything to improve it (say, for example, you've always paid cash for everything and don't have any contracts or loans to pay off), you have no rating and most companies won't trust you with a loan, even if you are very responsible with money and have a steady income.
The worst part is, you don't even get to know what your score is. You have the right to request your current score ONCE per year from the rating agency, but the process can be complicated. If you want to see it again, you have to pay for the right to look.
Three such agencies, and you never know which one(s) will be checked. It's not hard to check the information they have on file for you, provided you remember all of your addresses, banks, and other financial information, but they won't usually distill it into a score for you without payment. We were shown ours when the mortgage company requested it, though.
I will just add that if you really want something like a house here, the bank is the very last place you go for a loan. You exhaust every option with family members and friends and THEN you go to bank (banks are traditionally viewed like money vampires here).
That's partly frowned upon here because it can put a major strain on a relationship, particularly if it can't be paid back in a timely fashion. I've heard that it can help, though; some families have been able to pay off two houses within ten years by accepting temporarily cramped conditions and combining incomes. I'd be lucky to pay off mine within fifteen years, and my parents are still working on theirs.
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Topic: Credit Card stuffs (Read 6953 times)