credit cards

How your credit risk can affect you

Credit risk impacts your credit card terms

Whenever you apply for a credit card or other type of loan, lenders try to calculate the credit risk, that is, how reliable you'll be when it comes to paying back your debt.

That's why having a good credit history and a good credit score are so important. Not only do they determine if you're eligible for the credit card you have your eye on, they also can affect the annual percentage rate (APR) you'll pay.

Before issuing a credit card, companies look at your credit history to see if you've paid your bills in a timely fashion. They typically look at your FICO score to help judge your credit risk. Your FICO score draws on the reports from the three main credit bureaus, Experian, Equifax, and TransUnion.

Your credit score is based on these reports and can range from 300 to 850. The higher the number, the better your credit score and the better your chance of getting the credit card you want at favorable terms.

The Fair Credit Reporting Act lets you see your credit report for free once a year, but you have to pay to see your actual credit score. It's a good idea to check your credit reports annually to make sure there are no errors, and it's helpful to know your credit score.

Bankrate.com can help you can explore various credit cards based on your credit score. They range from cards for those with "excellent" credit to those with "bad" credit.

If your score isn't quite what you'd like it to be -- say you're close to the limit on your existing credit cards -- work to pay down your debt before applying for a new credit card.

That will help bring down your credit risk, boost your credit score, and help improve the chances of getting the credit card you desire with the terms you prefer.

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