What is
Credit
Anyway?Credit is a privilege and
a convenience. It is defined as "a reputation for
sound
character or
quality
-standing;
influence
based on the
good opinion
or
confidence
of others;
reputation
for solvency
and
integrity
entitling a
person to be
trusted in
buying or
borrowing;
an
arrangement
for deferred
payment of a
loan or
purchase;
and the time
allowed for
deferred
payment." Credit lets you pay for
goods and
services
on an installment plan, take out a loan for a house,
pay for clothing on a credit card, or pay for schooling
with financial aid. Credit allows you to make a
purchase without ready cash. You get credit by promising
to pay in the future for something you receive in
the present. But, there are strings attached; credit
usually costs something (interest), and what is
borrowed must be paid back.
Your
reputation
and
character as
a consumer
are often
determined
by how
others
perceive
your past
credit
history.
Institutions
and
individuals
who let us
use their
money want
some kind of
assurance
that they
will be paid
back. Credit
histories
provide them
a way to
measure our
financial
integrity.
What is a credit report?
When you apply for credit, the potential credit
issuer reviews your
credit report before approving your application. The
three major credit agencies are
Equifax,
Experian,
and
Trans Union. These agencies, which are also
called "bureaus," collect and report information
about consumers' financial habits and put the
information into a credit report. Each agency's
reports contain the same basic information: name,
Social Security number, current and previous
addresses, details about loans and how they've been
handled, public record information such as
bankruptcies, court judgments, or liens, and a list
of companies that have reviewed your credit.
-
Convenient,
hassle-free shopping. When you use a credit
card to make a purchase, you don't have to carry
a lot of cash, pay by check, or present additional
identification. A credit card also simplifies
and speeds up catalog ordering and currently is
virtually the only way to make Internet purchases.
-
Emergency
protection. Credit cards are the ultimate
financial security blanket. They can get you through
nearly any emergency situation.
-
Easier
budgeting. With a credit card, you can make
purchases and pay them off on a schedule that
fits your budget. Credit cards also allow you
to take advantage of sales and special offers.
-
Security.
If you lose cash, it can be used by anyone. If
you lose a credit card and report the loss to
the card's issuer before it is used, the issuer
cannot hold you responsible for any unauthorized
charges. If a thief uses your card before you
report it missing, the most you will owe is $50.
-
Travel
expenses. You'll find that a credit card is
almost essential for renting a car, purchasing
an airplane ticket, or booking a hotel room. Whether
you're across town or on another continent, a
credit card is the universal guarantee of your
good financial standing. And if you need cash,
you can get it at ATMs or banks around the world
that accept your credit card.
Establishing a good credit
history is an important part of your personal and
financial future. It can help open doors for you
or keep them locked. A variety of people and businesses
make decisions affecting your future based on your
credit history. Banks and other lenders consider
your credit report when reviewing applications for
mortgages, revolving lines of credit or other loans.
Landlords sometimes use credit reports to decide
among rental applicants. And a potential employer
may even assess an applicant's credit report prior
to extending a job offer. Your credit report may
also be reviewed when you apply for auto insurance
or homeowner's insurance, or even a mobile phone.
This is why it is so important to establish good
credit.
How do I
establish a good credit?
In short, by consistently
paying your bills on time. Remember, to establish
a good credit rating you should always pay at least
the minimum amount due every month by the due date.
Go
to Establishing
Credit for
more information...
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