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When Americans are new to using credit, they may have many options for doing so, but in most cases, it seems they turn not to loans, but credit cards.

Credit cards are consumers’ preferred means of obtaining their first financing from October 2005 through 2011, far outstripping loans for education, auto purchases, homes, and so forth, according to a study conducted by the credit scoring firm FICO. For instance, when it comes to their first account, 50.1 percent of those studied obtained bank-issued credit cards, and another 14.4 percent opened retailer-issued accounts. However, in many cases, consumers also opened more than one line of credit in different categories within six months of their first getting any sort of credit.

When it comes to obtaining loans as a means of opening a credit profile for the first time, 23 percent of those examined sought student loans, the report said. Another 13.3 percent received auto loans, and 1.5 percent got mortgages.

Within a year of obtaining their first account, the median consumer who did so in 2005 had a credit rating of 659, well below the overall median of 713, the report said. Further, about 50 percent of those consumers had scores of between 580 and 700.

But by 2011, about one-third of people who got their first account in 2010 had scores of more than 700, while another third fell in the 580-700 range, and the final third was below that low level, the report said. In addition, the median score among these people slipped 16 points to 643, indicating the toll the economic downturn had on many borrowers.

Among people who saw their scores either rise or decline by 50 points or more in the first year they had the accounts, there were some common factors to explain the moves in different directions, the report said. Not surprisingly, proper management of payments, debt size, and credit utilization ratios weighed most heavily in these areas.

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Those factors make up a total of 65 percent of a consumer’s total credit score, meaning that keeping balances low and making all payments on time and in full is of the utmost importance for those who want to maintain healthy credit throughout their lives.

Image: nubobo, via Flickr

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