A credit card is a card issued by a financial institution, typically a bank, and it enables the cardholder to borrow funds from that institution. Once a credit card has been opened and the funds drawn, the credit card issuer will authorize the purchase of a product or service by the cardholder. If the credit card is later used for a charge other than the original purchase, it will be returned to the issuer. If the purchase is later reimbursed, the credit card will become void.
Borrowing from credit cards is fairly simple. To get a card, you will need to give an ID and proof of identity, such as a valid driver’s license, passport, or similar document. To purchase a product or service on a credit card, you’ll need to show proof of purchasing it at a retail location. Visit this webpage to get all the details.
The Great Recession (2008-2009)
The Great Recession of 2008 to 2009 saw an increase in credit card bankruptcies. Many of those who could no longer borrow or had been unable to maintain their jobs due to the recession saw their credit score become one of the major criteria that affects a potential employer’s hiring decision. Job loss or unemployment, along with poor financial performance, can decrease a person’s credit score and result in a loss of access to certain credit. For example, a person who’s had his credit score drop 20 points during a five-year period will be less likely to obtain a mortgage.
Credit Score Trends
Today, consumers’ credit scores can be classified by the four most common scoring systems: FICO Score, VantageScore, MidScore, and Equifax Score. Unlike the three previous generations, FICO and VantageScore credit scores were created by the three major credit bureaus, Equifax, Experian, and TransUnion, respectively. FICO Score is the most widely used scoring system for evaluating credit risks. The FICO Score can be considered as a typical score of people who use credit, while FICO MidScore and Equifax Scores are used more for those with specific risk factors or those with no use of credit, as well as for companies who will use credit scores.
Average Credit Card Debt Level
Currently, there are two credit card debt levels. The FICO Score Credit Score Debt Level # of Cards and Credit Cards Total FICO Score Mid Score Equifax Score.
The FICO Mid Score Credit Score is a means of gauging your credit risk. Equifax used to use FICO scores for consumer credit scores, but has since switched to using Equifax’s Mid Score instead. Mid scores are preferred because they will see a much greater increase than FICO Scores once a score is collected. Equifax’s Mid Score now weighs more heavily on those people who have low scores, but a high history of frequent card payments or is low on debt as a proportion of their personal assets, such as a house, of their personal income.
How is Credit Card Debt Calculated?
After taking a person’s FICO Score and Equifax Mid Score into account, the Equifax believes that a score of 125 would represent a high credit risk.