Copyright 2007 Ed Bagley Do you realize that in our country you are penalized for practicing good money management habits? Think about it. If you paid for your own college education and refused to fall into the credit card trap that uses lenders to purposely suck the financial life out of nave students, you might graduate debt free and have no credit history. When you want to buy a vehicle on credit or a home with a mortgage, you could not get a loan without a credit repayment history and a decent FICO credit score. For years young adults with no credit history, limited credit history or blemished credit history have worked around the problem by having someone with good credit-usually a parent, spouse or good friend-added as an authorized user to their credit card. Once the authorized user is added, his or her credit card payment history is added to the account, giving the original card holder a higher credit score and access to loans and better loan terms. All of this is about to end as Fair Isaac (the developer of the FICO credit score) will create a new scoring formula to eliminate the authorized user tactic. Learn what you can do to protect yourself. Fair Isaac is taking the action because it estimates that 30% of the 165 million consumers with credit cards have authorized users on their accounts. Once the new system is implemented in mid-2008, millions of authorized users will see their credit scores decline or go into free fall. Authorized users with no credit history of their own will see their credit scores disappear. Those hurt the most may be young adults and married women. Here are some tactics these two population groups can use to fight back: 1) If married and listed on your spouse's account apply for a credit card in your own name. 2) Apply for a revolving credit card from a department store or other retailer as they are easier to get because they generally have lower credit limits and higher interest rates. 3) Apply for a secured credit card because you put money into an account in advance to cover your card transactions. If you default on your payment, the lender debits your account to cover the payment. Sometimes secured credit cards become unsecured credit cards when you pay timely over a period of time. In some cases, you may even get back the initial deposit in the secured account plus interest. 4) Try to keep your balance below 30% of your available credit as this credit utilization will improve your credit score. You can research fees and other features of credit cards at http://www.bankrate.com (Note: This is the last of a 3-Part Series.)
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