Credit Focus

Being Smart When Managing Credit

The Basics of Credit

As you mature and enter into adulthood, there are many essential big purchases that you might make. This includes student loans, buying a car, your very first loan, or any other type of personal loans that you might need. Because these items require a large sum of money, Credit may be used. Credit will help you pay for any of your purchases, but you must pay them back on a later date.

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

Credit cards and you

With a simple swipe you have the opportunity to make a purchase at most stores. In order to obtain this piece of plastic which is a credit card, you must apply either by phone or online to a credit card company. You may choose which card is the best for you because each card comes with certain fees and restrictions. Credit cards companies may or may not charge you an annual fee for the use of their card. On top of that you will have to pay interest rate (APR) which can vary from card to card. Depending how much money you owe, that is where the interest rate will be charged.. Depending on what card you obtain you will have a credit limit or maximum amount of money the credit card company will allow you to borrow. You must keep track of your spending because you do not want to exceed your credit limit and receive a over-the-limit-fee. You must also make sure to make your payments in time or avoid having bounced checks in order to prevent penalty fees. Late payments may lead to an increase in your interest rate.

Tips on Credit

1. Try to only use credit for necessary purchases that will leave you with smart debt. This includes buying a house, a car, or school loans.

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.

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