Basics of Credit
Know What Your Getting Into
What Is Credit?
You might not know what credit actually is, so reading this article will help you. Credit is the ability to borrow money and being able to return it in a future payment. Think about it this way, your going to borrow money but your going to pay it back to the lender and then also the interest There are different types of credit. There is either your school loans, mortgage for your home, also for buying a car. Depending on who you are credit has it's ups and downs, a big down side to it is there are little fees hidden throughout your plan. Usually you have to pay a payment a month but if you don't keep up with your payments they get bigger, which can either raise your credit score or drop it, the higher your score is the better. Determining if you get a credit card is going to be based on the "Three C's of Credit". The three C's show your creditworthiness, they are Character, Capital and Capacity. Character would be based on your sense of financial responsibility, can you pay your bills on time. Capital is the value of what you own, how much money do you have? Capacity would be the ability to what you owe, can the bank get their money back. Usually before a bank would give you a loan they look at your credit bureau, which is basically all your money history. They would usually check for either a school mortgage or car or even a personal load.This is also called your credit report.
Key Terms of Credit
Credit Cards, What You Need To Know
What is a credit card? It's not just a piece of plastic that buys you things. This card can get into a whole lot of trouble if you don't know what your doing. It is borrowing money from the bank and pay it back later on and interest. The amount you pay back depends on your interest rate (APR). You usually have a credit limit, how much money you can actually use. Putting a limit on your credit card is a smart thing to do, it can help you from over-the-limit-fees from the bank. You want to have a safe amount as well, not to high of a limit but not to low of a limit. When going over there is a penalty fee, this usually happens when you miss a payment. One payment you don't want to miss is the annual fee, not all credit cards have one but majority do. You can use a credit card basically anywhere, stores, payments, online, etc! Scary part is that, anyone can use it, at times people don't ask for I.D.
Important Words to Know
You get into credit you want to know some key words. Some words would be your APR, it is your annual percentage rate, you typically have this on your loans or your credit. It is how much percent you are going to pay as well as what you owe. Your credit limit is something important to know, if your credit limit is too low you might now be able to buy what you want have be stopped. It is the max amount you can have on your credit card. Also, know what your grace period is, it is the deadline you have to pay what you need. Doing this can help you with your organization of payments.
Keep An Eye On Your Credit
Be sure of what you are doing when it comes to credit cards, if you are one of those people who have to buy something no matter what, maybe a credit card is not your thing. You don't know how hard it is to get yourself out of debt when you don't have any money to pay back the bank yourself. Learn the concepts, know the little hidden things throughout the contract you are about to sign and don't be afraid to ask people questions, its for your own good!