Financial Information

If you’ve read many articles about credit, you’ve likely come across some sensational pieces about credit score trends, credit card fees and credit card debt in America.

Studies on credit card use, debt and credit scores don’t always support the speculations and anecdotes. Read on for five surprising statistics about credit.

“In contrast to student loan debt, student credit card debt is far less onerous, far less pervasive and far less significant,” says Eric Weil, managing partner at Student Monitor, which conducts a biannual financial services study among college students. The study involves in-person interviews with 1,200 students at 100 representative college campuses across the nation.

According to the Spring 20Ǫ Student Monitor Financial Services Study, among the 37 percent of students who carry a balance on a credit card issued in their own name, the average amount owed is just $513. One reason: The credit limits on their accounts aren’t that high.

“When you hear these stories about a kid having ฟ,000 worth of credit card debt, that’s interesting since the average credit limit is only $2,380,” Weil says.

Tip: Find out how the Credit CARD Act of 2009 affects young credit seekers.

Defying some analysts’ predictions, annual fees on credit card accounts have not surfaced in greater numbers since the Credit Card Accountability, Responsibility and Disclosure Act, or Credit CARD Act, took effect. The share of credit card offers with annual fees was just 25 percent in the second quarter of 2010, down from 36 percent in the fourth quarter of 2009, according to Synovate Mail Monitor.

“Issuers are hesitant to send an offer carrying unattractive terms such as an annual fee, as consumers will likely opt for an offer of similar caliber with no annual fee,” Anuj Shahani, director of competitive tracking services at Synovate, said in an e-mail statement. “It’s all about gaining new customers.”

The average annual fee has dropped as well, from $ȴ at the close of 2009 to $78 in the second quarter of 2010.

Tip: Compare rewards credit cards that charge an annual fee against no-fee options. How quickly would you earn the fee back in rebates or rewards?

Many households carry credit card balances instead of paying in full, but the practice may not be as widespread as you think. About 46 percent of American families revolve a credit card balance month to month, a proportion that has remained nearly unchanged since 2004, according to the Federal Reserve Board’s Survey of Consumer Finances for 2007. For those carrying a balance, the average amount increased 30.4 percent to $7,300.

About 40 percent of credit card holders carry a balance of less than $1,000, according to myFICO.com.

Most people aren’t maxing out their cards and then paying them off, either. According to FICO, “more than half of all people with credit cards are using less than 30 percent of their total credit card limit.”

Tip: If you are struggling to pay your credit card bills, consider these 15 signs you might need credit counseling.

You probably know that charging up credit cards hurts your credit score. That’s because 30 percent of your FICO score, the industry standard, comes from how much debt you have. The proportion of available credit on your credit cards that you use is an important ratio in this category.

Closing out a credit card account with a zero balance reduces that total amount of available credit and can increase the debt-to-limit ratio, which in turn can lower your credit score.

Yet the move doesn’t always damage scores or depress them permanently. Recent research conducted by FICO found that, for consumers who saw their available credit reduced during April through October 2009, the median credit score increased from 755 to 757 over the six-month period.

“One of the reasons why they weren’t decreasing was that a lot of the lenders seemed to be targeting inactive and lowly utilized cards for these credit line decreases,” says Frederic Huynh, principal scientist at FICO.

In other words, low credit card balances can shield your score from damage resulting from unwanted reductions to the credit limit or account closures.

Tip: Read “How closing a credit card affects credit score” for more information on the subject.

“Regarding the median score, we continue to track the median score and it remains extremely stable,” Huynh said in an e-mail statement. The median FICO score dipped slightly between October 2008 and October 2009 from 713 to 711, according to FICO data using Equifax-based scores.

According to Huynh, most of the recent score movement has occurred in the “tails” of the FICO range, which runs from 300 to 850. “Lately we see slightly more consumers in the lower-scoring intervals, and slightly fewer consumers in the highest score intervals,” he says.

The shifts are less than jaw-dropping. For instance, a widely reported statistic says 25.5 percent of the population now has a FICO score below 600. But this was only a slight change compared to the previous year, when 25.2 percent of Americans had a FICO score of 599 or lower.

On the high end of the scale, about 37 percent of the population has a FICO score of 750 or better as of April 2010.

Tip:Estimate your FICO score for free.

Click on the following links for more information about your credit.

• What is a credit score?
• FICO score estimator
• Raising your credit score
• Which fees can go up on your card?
• Find the best credit card