I wouldn't say it hurts or helps you more than a regular credit card. you can definitely get store cards without credit, they are falling all overthemselves to open as many cards as possible.
Key factors of your score
Just what goes into the score? Everything in your credit report, with different kinds of information carrying differing weights, says Fair Isaac Corp. PublicAffairs Manager Craig Watts. The FICO-scoring model looks at more than 20 factors in five categories. (The VantageScore relies on slightly different factors.The Bankrate feature "New Vantage credit score now online" compares the FICO score with VantageScore. )
1. How you pay your bills (35 percent of the score)
The most important factor is how you've paid your bills in the past, placing the most emphasis on recent activity. Paying all your bills on time is good.Paying them late on a consistent basis is bad. Having accounts that were sent to collections is worse. Declaring bankruptcy is worst.
2. Amount of money you owe and the amount of available credit (30 percent)
The second most important area is your outstanding debt -- how much money you owe on credit cards, car loans, mortgages, home equity lines, etc. Alsoconsidered is the total amount of credit you have available. If you have 10 credit cards that each have $10,000 credit limits, that's $100,000 of availablecredit. Statistically, people who have a lot of credit available tend to use it, which makes them a less attractive credit risk.
"Carrying a lot of debt doesn't necessarily mean you'll have a lower score," Watts says. "It doesn't hurt as much as carrying closeto the maximum. People who consistently max out their balances are perceived as riskier. People who never use their credit don't have a track history.People with the highest scores use credit sparingly and keep their balances low."
3. Length of credit history (15 percent)
The third factor is the length of your credit history. The longer you've had credit -- particularly if it's with the same credit issuers -- the morepoints you get.
4. Mix of credit (10 percent)
The best scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. "Statistically,consumers with a richer variety of experiences are better credit risks," Watts says. "They know how to handle money."
5. New credit applications (10 percent)
The final category is your interest in new credit -- how many credit applications you're filling out. The model compensates for people who are rateshopping for the best mortgage or car loan rates. The only time shopping really hurts your score, Watts says, is when you have previous recent credit stumbles,such as late payments or bills sent to collections.
"Then, looking for new credit will be seen as an alarm because statistically, before people declare bankruptcy and default on everything, they look for alife preserver," Watts says. Also, if you have a very young credit file, an inquiry can count for more than if you've had credit for a long time.
What doesn't count in a score
The scoring model doesn't look at:
age
race
sex
job or length of employment at your job
income
education
marital status
whether you've been turned down for credit
length of time at your current address
whether you own a home or rent
information not contained in your credit report
A lender may consider all those factors when deciding whether to approve a loan application, but they aren't part of how a FICO score is calculated, Wattssays.
Credit scores are not perfect
The major drawback to credit scoring is that it relies on information in your credit report, which is quite likely to contain errors. That's why it'scritical that you check your credit reports annually, or at the very least three to six months before planning to buy a house or a car. That will give yousufficient time to correct any errors before a lender pulls your score.
Watts says that the need for accuracy in credit files is one reason why it's good for consumers to learn about credit scores.
"There's a hope that as consumers know about credit reports and scores, they'll do more to correct errors and provide more oversight," hesays. "If consumers can police the accuracy of their own reports, everybody gains."
Want to get an approximation of your score? Bankrate and FICO have teamed up to create the free FICO Score Estimator.
Source:
http://www.bankrate.com/brm/news/credit-scoring/20031104a1.asp
