Creditable Creditworthy News

Editor: Sweety Patel

Credit? As in extra credit??

Most of you are used to the word credit being associated with school work and grades, but it is now time that you are introduced to real world credit. Credit is the ability to borrow money in exchange of a promise of a repayment in the future. There are two forms of credit, loans and credit cards. You might have talked to your counselors about taking out student loans, well that is a form or credit, You would be given money to pay for tuition and in return for a promise to repay the moneylender later on. But of course the banks don't just loan out money to everyone in exchange of payback, When you repay the credit the banks charge interest on them. The interest rates differ based on what the loans are taken out for. Personal loans are installment loans, meaning that you get a fixed amount of money that you repay in equal installments over a period of month or years. They also don't give out credit to just about anyone. The banks want to ensure that the person whom they are lending the money to can be held responsible to repay them in the future. In order to get credit you must demonstrate credit worthiness or reliability to repay the loans. The lenders judge your creditworthiness based on character, credibility, and capital. Another way they judge your creditworthiness is through your credit score. The credit score is a number between 300 and 500 that is assigned to you based on the credit information like bounced check, missed rent payment, bankruptcy, or being sued by the credit bureau. The credit bureau collects all this information carefully and then creates a credit report for you that includes your credit score.

Creditworthiness

Creditworthiness is what determines whether you are going to get the loan. It is divided into three sections; capital, character, and capacity. Capital is the value of what you own. This value can be gathered from savings, investments, or property that you own. The idea behind this is that if are unable to work to repay the loans maybe you will be able to repay the loans with the capital. The second part of creditworthiness, character, is the sense of financial responsibility. This is gathered from dependability or how many steady jobs they have held or long term residences that you have held. They also look at your credit history where they can see if you have bills that weren't paid on time. The last aspect of creditworthiness is capacity or your financial ability to repay the loan. The lenders want to make sure that income is high enough that you will be able to repay them and you don't have any major expenses or debt. If you are able to satisfy all three sections then you will be able to get a loan no problem.

Credit Cards

You have grown up seeing your parents buy numerous things with the swipe of their plastic card. But there is more the plastic card then you realize. A credit card is issued by a bank or a business that allows you to buy items on credit. This means that you can buy items that you don't have to pay for right away, rather you can pay for them later when you next paycheck comes. Credit cards can be used pretty much everywhere from restaurants to movie theaters. But that doesn't mean you can go around buying everything that you see, you must make sure you are only buying what you can afford to pay for at the end of the month. Some of the card have credit limits which you can't overpass. If you spend more that the credit allows you may have to pay the over limit fee which is charged by many of the cards. The credit cards aren't just issued to you for free by the bank, many of the cards may have an annual fee. The annual fee is paid yearly for the card, it is separate form the interest. A interest rate or APR is set on the credit card. The bank demands that if you are unable to pay the entire balance by the due date, the interest must be paid as well. There are also penalty fees if you fail to pay the payment on time, go over the limit, or cash advance. Credit cards might seem scary due to all the fees and interests but credit cards greatly help the economy for they allow the consumers to buy more items allowing the economy to continue flowing.

Credit Card Tips

1. Know you card's interest rates, fees, and payment schedules
Don't remember at the last minute that your payment is due the next day, be in control of the schedule. Even if you do fall behind on payments make sure you are familiar with the interest rates and that you will be able to afford them.

2. Don't go over the limit

Although some of the banks don't have an over the limit fee it is going to be very hard repaying that month's bill when you subtract all the other expenses from your paycheck.

3. When shopping for credit cards, make sure to look around for a low interest rate

Everyone plans on only buying what they have to with the credit card and paying all the payments on time, but life happens and you might have missed a payment between too many business trips or meetings. Always be ready for emergencies.

4. Only buy what you need.

Even though you are spending just couple of dollars here and there, they can add up after a while. You might not be able to repay the couple of dollars that you spent here and there.

5. Don't think of the credit card as your money.

When you spend with the credit card you are buying on borrowed money, you aren't actually buying with your own money. Keep that in mind before you absolutely need to get something next time your out shopping.