The U.S. and credit cards
Everyone has heard the notion that most Americans live on credit and that all they do is borrow money from banks.
Let's get to the bottom of this, and why this is the case.
Let's start with such a concept as a credit rating, which is a kind of assessment of how much you can trust a person in financial matters, his creditworthiness.
It is formed by special agencies by collecting data from various companies with which an individual has (or has been established with) such business.
This can include information about bank accounts, utility bills, fines, tax records, outstanding loans, and so on.
After a careful analysis, the agency determines the person's credit rating on a special scale, from 300 to 850 points.
A number below 620 is a bad score, 720 and above is good, and everything in between is average.
With the theory a little bit sorted out, and now we move on to practice.
Why does anyone need such a rating? Let's say I decided to rent a house. Before I sign the contract, the landlord determines what kind of security deposit I will have to pay by checking my credit rating.
If it is high, it means I am responsible for paying my bills and have no debts, so the deposit amount will be quite low (a couple hundred dollars).
If the rating is bad or there is no information about it at all, I will have to pay 100-150% of the monthly rent.
Such checks are also carried out when buying a car and house on credit and in many other domestic situations, positively affecting the terms of transactions in the case of a high rating.
So how do you get that coveted good rating? With the help of credit cards. They work here according to the following principle: the bank opens a credit account for the user with a certain ceiling. This can be $500, $1,000, $5,000, or more. You can find out where and what the best credit cards are available on a special website.
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