Credit Made Easy

Helpful Terms

  • Credit
  • Credit Score
  • Credit Bureau
  • Credit Report
  • Credit Worthiness
  • Interest (APR)
  • Lender
  • Credit Cards
  • Personal Loans

Credit Basics: A Good Foundation To Building Credit

Are you in the situation where you want to buy: a house, car, or pay your way through college? Do you find yourself not having enough money to do those things? If so, then I know just the thing for you; credit. You may have heard this term before, but you might not have known about it in depth. Credit is the ability to borrow money from a bank or company, also known as a lender, with a promise that you will pay the full amount back with interest,also called your Annual Percentage Rate, before a certain time frame. What determines how much credit a person gets is their Credit Worthiness, which is is the ability to verify if a person is reliable enough to pay back a loan. This is determined by three things: Character, Capacity, and Capital. Character is your dependability, credit history, or financial responsibility. Similar to Character, Capital is the ability to repay your loan, see how much income you bring in, and see what are the major expenses or debts you have. Unlike the last two, Capital is the value of your personal belongings. Credit comes in two different forms, personal loans and credit cards. Did you know, that without credit you would not be eligible to for loans to buy certain things like a house or car? All the information that is needed for your credit worthiness is compiled by the Credit Bureau; who later sell it to companies, like department stores or banks, whenever you try to use credit. After compiling your information, the credit bureau assigns you a Credit Score. Usually this score ranges from 300-850, 300 being the lowest and 850 being the highest. These numbers show your credit worthiness and show your ability to pay your loans on time. The higher your credit score the lower APR you have with an increased chance of getting approved for big loans. To get a high credit score you have to be on time with payments, have low debt, a long credit history, and a limited amount of credit cards. Credit history is requested when you apply for credit, receive it from the credit bureau once a year, or suspect you have been a victim of identity theft. It is a good way to see your credit score and keep up with past or recent loans. Whoa! I bet you didn't know this much about credit, did you?
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Understanding Your Credit Card

A credit card, like a debit card, is a small piece of plastic that is used to pay for items as an alternative to cash; credit cards may be used anywhere they are accepted. Unlike a debit card the money on your credit card is not yours; instead, it is the lenders' money. Most cards depending on their policy will charge you a required annual fee, once a year, ranging from $15-$100. Every credit card has a credit limit, which is a limit to a certain amount of money you have to spend. If you do happen to go over your credit limit you can have your card declined, or you can be charged a over-the-limit fee. Every month you will receive a statement with the amount of money you owe. This amount should be paid before the stated deadline because if past due the company will charge you a penalty fee every time you are late. Each credit card has an Annual Percentage Rate that ranges from 0%-29%; sometimes, it is possible that this will increase if you do not pay your existing balance by the deadline. Credit cards can have positive effects if used responsibly and properly. Credit is good for those people who have jobs and make payments on time because they have a higher credit limit and can repay it with little to no hassle. It also allows people to purchase more goods who later give jobs to those who make the goods. When used irresponsibly credit can have negative effects like leaving people with enormous amounts of debt that can keep piling up if not paid. Just like a high demand on goods creates jobs, if there is a low demand on goods and not enough people to pay for goods there will be less jobs.

Credit Card Awareness

When using your credit card be sure to:

  • Request a credit report once a year
  • Be aware your information
  • Sign up for identity theft
  • Keep up with payments
  • Avoid minimum payments each month to avoid debt