There is a common myth that consumers tend to believe. They believe that credit cards could help them build up their credit. Is this really true? According to Steve Repak, it is not true. Having a credit card does not actually boost someone’s credit. In his article, “The A to Z of Credit and Credit Cards”, Mr. Repak brings up some solid facts that support the claim that having a credit card does not necessarily mean that a consumer will have good credit. In the article, he describes the literal A to Z’s of having a credit card. All the letters stand for something a consumer has to be aware of when they have a credit card. A lot of the facts actually play into calculating a credit score, some of the factors that he states are, “…your payment
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There are countless factors that go into calculating a credit score. Fumiko Hayashi and Joanna Stavins, the authors of “Effects of Credit Scores on Consumer Payment Choices” discuss other factors that go into determining a credit score. They show the effects that credit scores have on a consumer and how that effects how they spend their money. Their motivation for writing their article was that there was an increase of debit card use compared to credit card use. Due to the increase of debit card usage, there were multiple studies conducted to observe consumer payment choices. Some of the findings of their study was that “Consumers with a college degree were more likely to adopt a credit card than consumers without such a degree” (Hayashi and Stavins 7). The consumers with the degree are more likely to have a job and money, so they are more likely at a lower risk of bankruptcy and have a lower risk of having a low credit score. The FICO score also plays a big role of credit score. According to the authors, “Credit cards get progressively better (relatively less costly) as FICO scores increase. In other words, individuals with lower FICO scores assess credit cards as more costly than do higher-scoring individuals” (8). The higher the FICO scores, the less expensive a credit card is and vice versa. The authors also found that there is “a positive correlation for both 2008 and 2009 between a consumer’s credit limit and credit score and an even stronger positive correlation between the average credit limit per card and credit score” (8). Basically the authors found that the lower the score, the lower the limit, thus the less the consumer spent and vice versa. They also found that having a low credit leads to a higher usage rate and having a high credit the lower the usage rate because when a consumer has a low credit score, they want to raise the score and so they end up using their card more,
There are countless factors that go into calculating a credit score. Fumiko Hayashi and Joanna Stavins, the authors of “Effects of Credit Scores on Consumer Payment Choices” discuss other factors that go into determining a credit score. They show the effects that credit scores have on a consumer and how that effects how they spend their money. Their motivation for writing their article was that there was an increase of debit card use compared to credit card use. Due to the increase of debit card usage, there were multiple studies conducted to observe consumer payment choices. Some of the findings of their study was that “Consumers with a college degree were more likely to adopt a credit card than consumers without such a degree” (Hayashi and Stavins 7). The consumers with the degree are more likely to have a job and money, so they are more likely at a lower risk of bankruptcy and have a lower risk of having a low credit score. The FICO score also plays a big role of credit score. According to the authors, “Credit cards get progressively better (relatively less costly) as FICO scores increase. In other words, individuals with lower FICO scores assess credit cards as more costly than do higher-scoring individuals” (8). The higher the FICO scores, the less expensive a credit card is and vice versa. The authors also found that there is “a positive correlation for both 2008 and 2009 between a consumer’s credit limit and credit score and an even stronger positive correlation between the average credit limit per card and credit score” (8). Basically the authors found that the lower the score, the lower the limit, thus the less the consumer spent and vice versa. They also found that having a low credit leads to a higher usage rate and having a high credit the lower the usage rate because when a consumer has a low credit score, they want to raise the score and so they end up using their card more,