The Basics of Credit
In order to obtain good credit, you must demonstrate your creditworthiness. Creditworthiness is your ability to pay back a loan. In order to get a good credit score and ensure your creditworthiness make sure that all payments are made on time, have a limited number of credit cards, and a low debt.
A lender is able to determine your creditworthiness by checking information provided by the Credit Bureau. The Credit Bureau also provides a credit report that states your credit score which is between 300 and 850. The higher your credit score is the better because a bigger loan will be made with a low interest rate.
"Is the reliability to pay back a loan"
"Is a number assigned to individuals which lets lenders know the capacity of a consumer to pay back any loans. It ranges anywhere from 300-850."
"A report of an individual's credit history which is completed by the credit bureau and used by a lender to determine a loan applicant's creditworthiness"
Credit Cards: What You Need to Know
Costs of using a credit card:
Annual fee must be paid
Interest rates are applied when the entire balance is not paid by the due date
Penalty fees are received for not paying on time.
- There is Credit limits which is a specific amount of money you can spend with the card. If you exceed this limit, you will be charged an over the limit fee.
- While many credit card companies are flexible with their cards they also offer special features and rewards. Some rewards may include bonus points, flight miles, discounts for events, concert and VIP tickets, and some cards even let you choose your payment due date.
Smart Consumers: Don’t Fall Into the Credit Card Trap
Pay on time
Pay in full
Attempt to avoid any late payments
- Set a budget to avoid going over the limit