Being Smart When Managing Credit
The Basics of Credit
Credit usually comes in two forms, that of a loan or a credit card. Usually for a car or a house you would require a loan from a bank which in this case would be the lender. Banks will try and see if you have creditworthiness by seeing if you have a steady job, have a steady income, and your current assets. Most lenders will typically run a credit report which includes past credit usage that is provided by the Credit Bureau in order to determine whether you qualify for the loan or line of credit.If have any late payments on your credit, it will negatively affect your credit score causing it to go down. The lower your credit score, the more you will have to pay for interest and you have a lower chance to receive a loan or credit. The better your credit score the more likely it is that you will be given a good loan with low interest rate. Your interest rate or APR is the fee that you will have to pay for the credit or loan. This is how credit card companies, banks, and other financial institutions make money. The other form is that of credit cards. With a simple swipe you can obtain many goods or services, but eventually you will get billed and have to pay that money back.
Vocab Terms to Know:
APR- annual percentage rate, typically of interest on loans or credit
Credit Report: A record of a person's or company's past borrowing and repayment of borrowed credit.
Lender: An organization or person that tends to let someone borrow money
Credit cards and you
Tips on Credit
2. Make sure to get in all your payments in time. This will help you avoid penalty fees from your credit card company or lender.
3. Don't bite of more than you can chew. When making a purchase with credit, make sure that you will be able to pay of the debt later. Remember that if you fail to make payments it will go on your credit score which will affect you in the long run. Having a good credit score will allow you to be able to get better interest rates and credit approval faster. Don't ruin your future by miss using your credit.
4. When looking for a loan, find the one that is right for you. Banks will offer different types of interest rates and payment plans depending on the loan that you need. Seek the one that you know you could pay off and not fall behind on.
5.Have someone else monitor your spending or usage of credit. This way they can inform you if you are making bad decisions or misusing your credit.
6. Make sure you are informed when it comes to loans and credit cards. There may be hidden fees or charges if you fail to meet the lender's standards. Always read in between the fine lines.
7. Just be responsible. Plain and simple.