The Road to Successful Credit

The Beginning Basics of Starting Your Credit

What is credit?

Credit is the ability to borrow money in return for a promise of future payment. The basic idea is buy now, and pay later. This allows you to obtain goods or services before making the payment.

What are the possible forms of credit?

Forms of credit include loans and credit cards. Personal loans allow you to borrow money that must be repaired with interest. Loans are typically used for bigger payments. You may obtain a loan for financing a new car, paying college tuition, or buying/renovating a home.

Credit cards are the most common type of credit. Credit cards allow repeated transactions up to a maximum credit limit, unlike loans. Each time you buy something you are borrowing money that you will have to pay back. If you make the decision to pay the payment back over time, the credit company will charge interest to your account.

What costs are associated with credit?

One thing that must be known is that credit is NOT free. You will have to pay interest and annual percentage rate, also known as APR. Many credit card companies will allow the first few months you are using credit to charge no APR. When APR is charged it will include any fees or additional costs associated with the transaction made.
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What determines if someone gets credit and how much they will get?

Creditworhiness is the main factor deciding the kind of credit you will recieve, if any. Creditworthiness includes three Cs, in which the lenders use to judge the type of credit you deserve. They will look at character, capacity, and capital. Capital is the value of what you own, capacity is your financial ability to repay a loan, and character is your sense of financial responsibility. The Credit Bureau collects information on consumers' credit, and will then give you a Credit Score in order to determine the ammount of credit you can obtain. They use it to assign Credit Score. **The higher this score the better!**


What is a credit card?

A credit card is a small plastic card in which is issued by a bank. This card allows the owner of the card to purchase goods or services on credit, again meaning buy now and pay later. This card will have a credit limit. A credit limit is the maximum amount a credit card company will allow on a single card. This is usually determined by the owner's credit score.
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Where can you use credit cards?

You can use credit cards almost anywhere. Some specific places may require cash paymens, but besides that you will be able to use the credit card to pay. Credit cards are also a better option for online payments. It is not recommended to pay for things online with debit cards, because this allows access to your checking account.
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Benefits and costs of using credit

Benefits: Using credit can be more convinent than pulling out cash, and it also allows you to recieve rewards. Many credit card companies will offer rewards for using their credit company. These rewards may include discounts on flights and vacations, early access to tickets for certain events, and many other incentives.

Costs: If you are using an higher end credit card in which is for an increased amount of money, you will have an annual fee. This is a required annual money amount you must pay. There are also quite a few penalty fees to be aware of. If you do not pay the entire balance by the due date you will be charged interest. This can range from 0% to 29%.There are also over-the-limit fees in which you will be charged if you go over the limit of the ammount of money on the card.

Smart Consumers: Don’t Fall Into the Credit Card Trap

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Safety Tips

Here are just a few tips and tricks that will enable you to stay safe while using your credit card:

1. Do not let the phrase "buy now,pay later" get the best of you. Making purchases without paying the amount yet may seem like a dream in the moment, but realize you WILL have to pay that money back. These are not free items.

2. Do not go over the limit you have on your credit card. This will result in fees.

3. Keep track of the purchases you are making with the credit card. This will allow you to make sure you can pay everything back, and that you are not going over the limit.

4. Pay the amount you owe to the bank ON TIME. Do not go past the due date, this will result in being charged a fee.

5. Refrain from owning too many credit cards. The average person owns four credit cards. This can increase the chances of falling into debt.