Credit: It's important to know.

By: Summer Siemieniak

Basics of Credit

Credit is pretty much a promise that you're going to pay back the money that you've borrowed. You need credit to buy a house and a car. To get those things you need a good credit score. Your credit score is made up of your credit history. When you're trying to get a personal loan for something, the lender will request a credit history. The credit bureau will sent it to you or to them. The reason they check this is to see your creditworthiness. If you have a credit card, are you use it and you fall into debt, your score will stink. What really stinks is that when you pay back the money, you have to pay back interest. There's an annual percentage rate that determines how much interest your pay.

What do these mean?

Let me break down a few words.

Creditworthiness is your ability to pay back., the value of what you buy, and sense of financial responsibility. You need to have a good job, you need to be able to make payment or your mortgage and car payment otherwise your credit score suffers.

What is a credit score? A credit score is a number to show your creditworthiness. It also helps with what your interest on your credit card payments will be. The lower your credit score, the higher your rate will be. Then you fall into debt.

Then we have the Credit Bureau. They keep record of everything from bounced checks to filing bankruptcy. These are the people that can help improve your credit score and file it out to loan places and real estate agencies so you can buy a house. You don't want to be on their bad side.

Credit cards: What you need to know.

A credit card is a card that lets you borrow money. Of course everything comes at a price. There are annual fees. They can go anywhere from $15-$100. There are also credit limits. You can only use up to a certain amount. If you go over, they will charge you $30. That's an over-the-limit fee. If you make a late payment or an overdraft and you pay late, there will be an additional penalty fee. Then you're in debt from all these fees, but remember you still have to pay an interest rate on them. Don't get me wrong, there are many benefits to owning a credit card. You can get cash back, a few cents here on groceries, a few dollars here and there from buying gas. It can add up. Plus, a lot of credit cards have mileage for airlines. So you can fly at a lesser rate.

Just some tips.

  • If you attain a credit card, don't buy everything you want. You DO HAVE TO PAY IT BACK! IT'S NOT FREE MONEY!
  • Don't fall into credit card debt, once you're in a hole its hard to get out.
  • Make all your payments on time. Car payment, Electric bill, water bill, ect. Stuff like this will lower your credit score.
  • Don't avoid credit, you'll need it to buy nice things like an engagement ring.
  • Avoid too many cards. One is enough. Two if seriously needed.
  • Your credit debt can contribute to the failing economy. So be a smart consumer.
  • If you get a credit card in the mail that you don't want, cut it up. You don't want someone to steal your identity and ruin your credit.