Basics of Credit

By: Angela Pyrdol

Credit

Credit is the ability to borrow money and pay back later. Credit comes in two forms, Credit Cards and Personal loans. Credit is not free though, you must pay an interest rate or APR fee for borrowing money. To get credit, you must determine your creditworthiness, to see if you are reliable to pay back loan. Lenders judge how much they give you based on character, capacity, and capital. All of your information is recorded and can be obtained from the Credit Bureau, like bounced checks, missing payments, and bankruptcy. All of those effect your credit score that ranges from 300 - 850, the higher the better. So when lenders request a credit reports to determine if and how much they should lend you they receive a credit score and credit report from the Credit Bureau.

Credit Cards

A credit card is given to a card holder to borrow money from a financial company. Almost every store allows for payment of goods and services through credit cards, because of their wide spread acceptance. Most credit cards lines have incentives like points back, money, airline travel. Credit cards allow consumers to have a continuing balance of debit over month to month. However, credit card company do charge an interest fee for borrowing money that is shown as a percentage, plus the annual fee that you are required to pay every month. When approved for a credit card you are given a credit limit, the max amount you can borrow. If spend over the limit you are charged an over the limit fee or are declined. Other penalty fees are late payments and increase in interest rate.


Stay Safe

  • avoid too many credit card
  • don't miss payments
  • avoid minimum payment
  • pay cash when you can
  • use credit for smart loans; school, car, house
  • low interest rates
  • use for emergencies
  • don't spend over the limit