Unlocking the Mysteries of Credit
What is Credit and How Does it Affect Your Life?
If you’re in the market to purchase a new home or car, you’ve probably become keenly aware of the effect that credit can have on every aspect of your life. Your credit history can determine what your interest rate will be on a loan, whether or not you’ll get a new credit card, and whether or not you’ll even get a car loan.
While it can affect so many areas of life, few people truly understand how it works. What is credit? How do you know if yours is good or bad? What can you do to change a negative history?
What is Credit?
Last Updated on Sunday, 16 August 2009 22:16 Written by Brett Bruce
There are many legal definitions for credit, but the bottom line is that credit means borrowing money from a lender to pay for something. You may be borrowing from a bank, a retail merchant, or a mortgage company. The person you want to borrow money from extends credit to you.
This means that they are going to let you have a product now that you will pay for later. When you borrow money, you make an agreement with the lender on how you will repay the loan.
In addition, you will usually pay a loan back with interest. This is a percentage of the original money that you borrowed that is tacked on to the loan. Adding interest charges is how a lender makes money.
The Cost of Bad Credit
Last Updated on Wednesday, 19 August 2009 13:24 Written by Brett Bruce Monday, 09 March 2009 13:30
Having poor credit can affect many areas of your life. There are many ways that you can develop an undesirable credit history. The most obvious is to borrow money and then not pay it back. However, there are other situations that aren’t so obvious that can affect your credit.
Paying money back late can damage your credit. So can having too many lines of credit open and charged to the max. Once you have bad credit, it’s easy to see how it can limit your life.
The Credit Bureaus
Last Updated on Sunday, 16 August 2009 22:17 Written by Brett Bruce
So, how does someone check your credit? There are actually bureaus where credit information is reported. What’s confusing is that there’s more than one where the information may be reported.
There are three major credit bureaus. Each of these companies takes information from lenders and adds it to your personal credit report. These bureaus operate completely independently from one another. They exist as a kind of clearinghouse for your credit information.
Preventing Credit Problems
Last Updated on Sunday, 16 August 2009 22:18 Written by Brett Bruce Monday, 09 March 2009 13:35
While it’s possible to repair your credit, the best thing to do would be to prevent bad credit from happening. It’s important to budget your family finances so that you’re not spending more than you actually earn.
Get Real About Your Credit
Last Updated on Sunday, 16 August 2009 22:18 Written by Brett Bruce Monday, 09 March 2009 13:36
Are you already in credit trouble? You probably know if you are. When your credit card bills come in are you only making minimum payments? Do you find yourself not even opening bills because you already know you can’t pay them?
Do you have constant late fees and over-the-limit fees on your credit card accounts? Is your mortgage or car payment past due? If you’re juggling bills and constantly feeling anxious about your finances, you’re probably in trouble.
The first step is to get real about your credit. You need to take a hard look at how much money you bring in each month and how much money is going out. If you’ve been avoiding dealing with your financial problems, you’re only making it worse.