Why Apply for Consumers Platinum?

If you have less than perfect credit or no credit, then Consumers Platinum is perfect for you. After completing our fast and easy application process, you will receive a $750 merchandise credit line from Consumers Platinum.

Stay up to date with the latest tips & tools from our blog!

Introduction to Credit Cards

What are Credit Cards?

Credit cards are payment cards issued by a financial institution. They allow people to make purchases using borrowed money. Unlike debit cards, which immediately deduct funds directly from a bank account, credit cards provide something called a "line of credit" that enables cardholders to borrow money, up to a predetermined limit. In this sense, credit cards are short-term loan agreements between the card issuer and the cardholder.

Credit cards offer convenience, flexibility, and a range of features such as cash advances and rewards programs. They can be used to make purchases at a wide variety of participating merchants, both online and offline. Then, once a limit is reached, the borrower must repay the amount borrowed - either in full or through monthly installments. It's important to use them responsibly. Because of their convenience, credit cards often come with some of the highest interest rates of any financial product.

Benefits and Risks of Credit Cards

Credit cards come with advantages and risks. While many people use them for convenience and security, they also provide an opportunity to build a credit history, an important factor in attaining any loan. Additionally, many credit cards offer substantial rewards programs, cashback options, and various perks like travel insurance or purchase protection.

However, it's notoriously easy to accumulate debt and overspend, especially when tempted by credit limits that exceed current assets. Failure to make timely payments can result in the accumulation of enormous amounts of interest and fees, making it harder and harder to pay off the debt. Furthermore, if used irresponsibly, credit cards can hurt your credit score and severely limit future borrowing opportunities. It's crucial for cardholders to exercise discipline, budget effectively, and understand the terms and conditions of their credit cards to maximize benefits and mitigate risks.

Why Understanding Credit is Important

Credit plays a significant role in almost every aspect of personal finance, from borrowing money to purchasing a home or car - even in finding employment. Lenders, landlords, and employers often make their first judgments about an individual's trustworthiness and reliability based on their credit profile.

Also: it's much easier to wreck your credit than it is to rebuild it. A few late payments can erase years of timely, responsible credit management from your profile. Unfortunately, this is by design. When it comes to managing borrowing money, perfection is the expected standard. But people are flawed. When we inevitably fall short of that ideal; credit card companies profit.

Individuals who truly comprehend the consequences are more motivated to proactively manage their credit scores and reports, ensuring their accuracy and identifying areas for improvement. They understand common terminology, how interest rates work, credit limits, and payment due dates. They make informed decisions when using credit cards or applying for loans. As a result of their responsible credit usage, they receive lower interest rates, lower insurance premiums, higher credit limits, lenient payment schedules, and generally-better financial opportunities.

A solid understanding of credit is the keystone of any financial foundation.

Building a Strong Credit Foundation

The Importance of Credit Scores & Credit Reports

Credit scores and credit reports are topics of immense importance. Both are essential tools that lenders use for evaluating creditworthiness and determining the particular terms and conditions of any loan.

Your credit score - often known as the FICO score (named after its creator, the Fair Isaac COmpany) is a condensed, numerical assessment of an individual's financial responsibility and ability to manage debt. Credit scores range from 300 to 850 and are categorized into different tiers: excellent, good, average, and poor. These descriptors may sound subjective, but they have specific implications for the interest rates you may receive and the types of loans you can access. A higher credit score opens doors to successively lower interest rates, higher credit limits, and credit cards with more attractive benefits and perks.

On the other hand, having a low credit score (or no credit history) can pose challenges when seeking credit. It may lead to higher interest rates, limited borrowing options, and even rejections for certain applications. However, it's important to remember that everyone starts somewhere, and building credit is a gradual process.

Credit reports provide a comprehensive record of your credit history, including details about credit accounts, payment history, and public records. Regularly reviewing your credit report allows you to monitor your credit activity, identify errors or fraudulent entries, and take necessary steps to rectify any discrepancies. By understanding and managing the information in your credit report, you can ensure the accuracy of your credit profile and increase your chances of accessing credit on favorable terms.

Building a good credit score takes time and responsible credit card usage. Making on-time payments, keeping credit utilization low, and maintaining a positive credit history can lead to significant improvements in your credit score. As you establish a solid credit foundation, you'll gain access to better credit opportunities, more competitive interest rates, and the more-attractive rewards programs offered by "premium" credit cards.

Interpreting Your Credit Score

In the previous section, we covered the basics of how credit scores are calculated. However, we didn't dive into the actual process of determining score. The reason being, there's a multitude of widespread myths, misconceptions, and misinformation campaigns aimed at keeping people in the dark about their true credit score.

Let's start with the fact that, even though FICO score is considered the only true credit score: there are actually 49 different versions of the FICO score. Only 9 versions are currently available to individuals. And, to add to the confusion, the FICO score itself is a composite of three other credit scores, each determined by Equifax, Transunion, and Experian.

Until recently, accessing your FICO scores wasn't an easy task. This was mainly due to the Fair Isaac Corporation, the creator of FICO scores, having an unusual and ethical monopoly on consumer credit ratings. The idea is that credit ratings cannot be treated as competitive products. In fact, it was the competition between corporate credit rating agencies like Moody's and Standard & Poor's that played a role in the 2008 housing market crash, which had severe implications for the global economy. If big banks didn't get their desired credit rating on a batch of junk bonds, they could simply turn to a competing agency. Similarly, if individual consumer credit ratings were unregulated and inflated in such a manner, it could potentially lead to a financial crisis of epic proportions.

So, for a long time, individuals had to pay to access their credit scores. However, in recent years, several companies have taken steps to address this inconvenience, although not all have done so ethically.

The three consumer reporting agencies—TransUnion, Experian, and Equifax—are responsible for collecting (or rather purchasing) their own credit information from various sources such as banks, credit card companies, and auto lenders. They compile this data into credit reports, which are then transformed into credit scores using proprietary algorithms and mathematical analysis. The reason for the existence of 49 separate scores is that FICO updates its algorithm more frequently than the three consumer reporting agencies do. Each update is intended to provide a "more accurate" result, but specific industries often prefer older versions of the FICO algorithm due to their existing risk models being based on different mathematical approaches. As a result, the previous scores remain valid, and it won't be long before we see the introduction of the 50th FICO score.

What matters most is not the average score, but rather which score lenders are looking at. And in approximately 90% of cases, that score happens to be a FICO score.

However, it's worth noting that the credit reporting agencies, which supply the consumer data used to generate FICO scores, are not restricted from selling that same data to other parties. Several new companies purchase this data and create their own version of a credit score. You've probably come across advertisements for companies like CreditKarma and CreditSesame. However, it's important to understand that the scores they provide are simply a close estimate - not genuine.

The guidelines established by the Consumer Finance Protection Bureau (CPFB) are applicable to both these alternative scores and FICO scores. Since the alternative scores are derived from the same data as FICO scores, there's usually a strong correlation between the two. The private companies operate without much regulation. FICO, on the other hand, as the nation's sole authority on official credit information, is accountable to the federal government. Due to different algorithms being used, significant discrepancies can often exist between the FICO score and these alternative scores.

There are now free and secure options available to access your FICO score. The following banks, credit unions, and companies have recently introduced free credit monitoring services. If you are a customer of any of the companies listed below, simply get in touch with an account representative to find out your genuine FICO score.

• 1st United Credit Union
• American Express
• Bank of America
• Barclays
• Capital One
• Chase Bank
• Citibank
• Commerce Bancshares
• Discover
• First Commonwealth Bank
• First National Bank of Omaha
• First Premier Bank
• Harvard University Employees Credit Union
• Polish & Slavic Federal Credit Union
• Premier America Credit Union
• Star One Credit Union
• Synchrony Bank
• US Bank
• Wells Fargo

**This list has been provided directly by the Consumer Finance Protection Bureau (CPFB) and has undergone thorough and independent verification. For more information, visit https://www.fico.com/

Factors Impacting Credit Score

There are six main factors used to calculate credit scores. As your financial profile changes, so will your score. Knowing exactly what affects your credit score gives you the opportunity to improve it over time.

1.) Payment History:

• Consistent on-time payments demonstrate reliability and financial responsibility.
• Avoid late payments, defaults, or delinquencies.
• Make timely payments a priority to establish a strong credit foundation.
• Accounts for 35% of your score.

2.) Credit Utilization Ratio:

• Keep your credit utilization ratio below 30% to showcase responsible credit management.
• Aim to pay off balances regularly and avoid maxing out credit cards.
• High credit utilization can negatively affect your credit score.
• Accounts for 30% of your score.

3.) Length of Credit History:

• Lenders prefer borrowers with a longer credit history.
• Start by establishing credit accounts early and maintaining a positive payment history.
• Building a solid credit foundation over time will positively impact your score.
• Accounts for 15% of your score.

4.) Credit Mix:

• A diverse credit mix will boost your credit score.
• Strive for a mix of installment & revolving debt accounts.
• Obtain only the credit you need and can manage effectively.
• Accounts for 10% of your score.

5.) New Credit Applications:

• Limit new credit applications to minimize the impact on your credit score.
• Each application generates a hard inquiry, which can temporarily lower your score.
• Space out credit applications wisely.
• Accounts for 10% of your score.

6.) Negative Information:

• Bankruptcies, foreclosures, collections, liens, and judgments all have a negative impact on your credit score.
• Address and resolve any negative information promptly.
• Negative information can remain on your credit report for several years.
• Impact varies on a case-by-case basis.

By understanding and managing the factors that impact your credit score, you can take proactive steps to boost your creditworthiness. Focus on making timely payments, maintaining a low credit utilization ratio, establishing a solid credit history, diversifying your credit mix, and being mindful of new credit applications. By improving these factors, you can enhance your credit score, unlock better financial opportunities, and enjoy the benefits of a strong credit profile.

Reading Your Credit Card Statement

As a cardholder, you can expect to receive a statement, either by mail or digitally, every month. Your credit card statement provides detailed, critical information on your card usage, spending, and account status. In this portion, we'll explore the essential details found on your credit card statement and discuss effective payment strategies to help manage revolving debt responsibly.

Key Factors on Your Credit Card Statement:

Your credit card statement presents several crucial pieces of information:

1. Total Amount Spent: The statement reveals the total amount you have spent using your credit card during the billing cycle.
2. Itemized Purchases: It provides a breakdown of individual purchases made during the billing period, helping you track your expenses.
3. Payments Made: The statement displays the amount you have paid towards your credit card balance since the previous statement.
4. Remaining Balance: This represents the outstanding amount that still needs to be paid before the payment due date.
5. Minimum Required Payment: The statement indicates the minimum payment you must make by the due date to avoid penalties.

The credit company is bound, by law, to provide you with statement details in a timely manner. But, the same laws require that the statement date must be a minimum of 21 days before the due date. So, be aware: statement months generally don't align with calendar months. That's why we strongly recommend setting up automatic payments.

Payment Strategies for Credit Cards

When it comes to making payments on your credit card, here are some essential strategies to consider:

Paying the Statement Balance:

No matter what: you should always make the minimum payment. And, if you're able: the statement balance. Always before the cutoff time on the official due date. You can pay several times a month, and you can always pay early. By paying off the entire balance, you demonstrate responsible financial management and avoid accruing interest charges on the remaining balance. Paying the statement balance in full also helps maintain a good payment history, which is crucial for your credit score.

Timely Payments:

Again, making your credit card payments on time is of utmost importance. Aim to make your payments before the cutoff time on the due date to avoid late payment fees and prevent any negative impact on your credit score. Set up reminders or automate your payments to ensure you never miss a due date.

Payment Frequency:

While it's generally sufficient to make a single payment before the due date, you have the flexibility to make multiple payments throughout the month. Some individuals prefer making weekly or bi-weekly payments to keep their credit utilization low and ensure they stay on top of their finances. However, as long as you pay the statement balance in full by the due date, the frequency of payments is a matter of personal preference.

Understanding Balance Terminology:

Different balance figures on your credit card statement indicate various stages of your credit card usage. The remaining balance refers to the outstanding amount that needs to be paid before the payment due date. Focus on paying off the remaining balance in full to avoid additional interest charges. The current balance represents the total amount you have borrowed on the credit card, minus the total amount of payments you have made. Understanding these balance terms helps you track your progress and manage your credit card debt effectively.

Billing Cycles:

Your credit card statement reflects the balance at a specific point in time, typically at the end of the billing cycle. The statement balance won't change until the card issuer generates a new statement. And, any statement refers only to the balance at one fixed point. The "remaining balance" is the amount that has yet to be paid off, which should be done before the payment due date, and the "current balance" is the total amount you've borrowed, less the total amount of payments you've made. It is important to note that any charges made after the statement period will be included in the subsequent billing cycle. Be mindful of the billing cycle dates to ensure you have a clear understanding of when your statement balance is generated and when your payment is due.