Chances are you are already carrying at least one department store credit card in your wallet. They are very popular and sometimes convenient for customers and can also save you money when you first take them out, they are a good source of revenue for the store, but are store credit cards a good idea for the consumer?

The fact is, this type of credit is mostly beneficial to the store and the financial institution that issues it. In case you did not know, most store cards are administered by third party banks, not the stores. Sometimes the banks associated with department stores have less than ethical business practices.

Stores usually tempt you with offers of 10 to 15% savings on your purchases if you open an account, but the greatest disadvantage is their higher than normal interest rates which can range from 20 to 30%. If you carry a balance with this type of rate, you will soon find out your accrued interest is far greater than the amount of your purchases.  Those interest rates make your balance grow very rapidly, specially if you just pay the minimum monthly amount.  So it is best to prevent debt than have to rely on a debt relief program later.

Very recently, while looking around one of these stores I happened to ran into a great bargain–a pair of leather shoes with a regular price of $40, but a sale tag of $9.99. Well, that was my lucky day because I needed this type of shoes and they fitted perfectly. The cashier tried to tempt me with a 10% discount if I just took “two minutes to complete the application”. I declined. He insisted. “But you will get free shoes” he said. “I have enough credit cards”, I said.

Admittedly I was tempted, but my common sense and will power prevailed. I do not carry balances, but I do have enough department stores credit cards and most of them I do not use. I gladly would like to cancel some, however my total credit line may decrease along with my FICO credit score.

So the next time you are out shopping and you are lured into their offers, take a minute to think. Do you really need this credit card? Will you be any richer by saving 10% or poorer by not doing so?  Do you have a credit card balance?

Have you ever wonder how are credit scores calculated?  While many banks and large financial companies create their own formulas to compute a consumer’s credit worthiness, the same basic principle is used by all financial institutions.

Credit scores are determined by various different types of data in your credit history.  Even though there are several factors that influence your score, the most significant one is your payment history.  So if you are or feel you will soon be behind on your payments, it is best to start a debt relief program as soon as possible.   Using the FICO score software, the major credit bureaus gather your credit information into five basic categories:

• Payment History–This includes late or missed payments. Your payment history has a relevance of 35%, thus it is the most important factor affecting your credit.
• Outstanding Debt–How much outstanding debt you have weights at 30%.
• Credit History Length–The value of your credit longevity is 15%
• Recent Credit has a 10% significance.
• Types of Credit is also worth 10%.

Although each credit score uses data from all five categories, each credit history is calculated differently.  The percentage breakdown of each category is a general rule, but may be different from one person to the next.

It is difficult to anticipate how much weight to give any one particular factor of your credit history. Nevertheless you can be certain that each credit score uses information from all five categories.