Credit

What You Need To Know

Basics of Credit

  • What is credit? Credit is your reputation as a borrower. It tells others how likely you are to repay your loans. Credit is made up from information about your borrowing history. Most of the information comes from your credit reports. Credit reporting agencies collect and then distribute all of this information about you. Credit bureaus have a ton of information. There are hundreds or thousands of lines of information about you in their database, and it’s difficult for lenders to sort through all of it. As a result, most companies use credit scores instead of reading through everything in your credit reports.

  • What are the forms of credit?
    There are 4 types of credit:
    1. Installment Loans: are issued by lenders on the basis of credit worthiness with a fixed repayment schedule.
    2. Credit Cards: are issued by a variety of lenders. This can include your bank where you keep your checking and savings accounts, or a lender that solely deals with credit cards. Always make sure you pay on time or your APR percentage goes up.
    3. Merchant Charge Cards: are extended by retailers for explicit use in their stores.
    4. Mortgages: are issued to assist consumers in purchasing a home. Unless you are an independently wealthy person, you will need a mortgage for the purchase price of a home.

  • What costs are associated with credit? The costs associated with credit cards are the discount fee charged by the credit card processing company and the up-front cost of purchasing the equipment. The fee varies on the type of card accepted and the method used to enter the transaction. Generally, swiping a card that is presented by the customer yields the lowest cost. On the other hand, accepting credit cards over the phone yields a higher rate due to the increased possibility of credit card fraud.

  • What determines if someone gets credit and how much they get? Credit beginners usually have but one question, “How do I get credit”? All the details about getting credit will follow, but the simple answer is, “Apply for it.” The best way for a beginner to get credit is to apply for a credit card meant for a beginner. If you already have a checking or savings account, check to see if your bank has a credit card for someone with limited credit history. If you can't get a credit card at your current bank, there are still more options.

Credit Cards

What You Need To Know

  • What is a credit card? A plastic card issued by a bank, business, etc., for the purchase of goods or services on.
  • Where can you use credit cards? You can use your credit card anywhere at anytime. Like most things in life, a credit card can be super in the right hands, but if you don't use it right it can cause you a real headache. It's important to know your credit card limit and stay within it. Your credit card limit is exactly that, it's the total amount your credit card provider is willing to lend you. The amount can vary from person to person and will be worked out on the scoring of your application. When you exceed your credit limit, you have to pay the over-the-limit fee.
  • What are the benefits and costs of using credit cards? Having a credit card in your wallet means no more running to the bank for cash, counting out change, or hurriedly scribbling in a check book when you need to make a purchase. You have to pay back from month to month and if you don't you have to pay a penalty fee. Some credit cards also make you pay an annual fee. Which is a small fee you pay once a year just for having a credit card. Every card requires an APR. In other words, it is the amount you will pay in interest charges per year.


Be Smart About Using Credit

  • Always pay on time.
  • Check your credit report once a year so you're not a victim of identity theft.
  • Don't use your credit card on gas or fast food(can add up pretty quickly).