Understanding the Basics of Credit

What’s the Deal with Credit?

Credit is a unique concept that allows an individual to experience financial obligations based on a promise. Everyone has credit, although some individuals find that their credit rating is better or worse than others. In addition to credit cards, which allow you to pay for items without having to pay cash for them, there are also things like loans and mortgages that have great influence on your personal number in regards to this crucial financial tool. For this reason, you should treat your personal credit with great respect, being careful to remain on top of payments and avoiding purchasing items that are simply out of your budget. Remember, credit is a privilege and you can lose that privilege quickly if you abuse the financial system.

Credit Card and Loan Applications

If you shop at large chain retail stores or check your mailbox, you have probably been presented with the opportunity to apply for credit cards or even a variety of loans. From home loans to automobile loans to business loans to student loans, the options are seemingly endless for ways to achieve that large purchase. However, before you sign for any loan or apply for a credit card, it is important that you understand the entire picture. Remember that you will be responsible for repaying the entirety of the loan or the balance of your credit card, including interest that accrues on the purchase. Although there are many legitimate facilities that allow individuals to open a credit card or finance a loan with minimal interest rates and additional fees, there are also scams in existence that can cost you a pretty penny. For this reason, you will need to thoroughly research any financial company before making such an important decision. By knowing all of the important information before you agree to potentially outrageous terms, you can save yourself a great deal of money, hassle, and worry later on down the road.

Credit Scores – More Than Just Numbers

The number associated with your credit score can have an impact on virtually all aspects of your life. This number is computed using a financial formula that takes literally everything into account. If you miss a payment on your credit card, have a late payment charge on your utilities, have too many credit cards opened with a high balance, or even close too many credit cards in a given time, then your credit score could suffer. This number is also the most used financial aspect that banks and financial institutions use when evaluating a candidate’s application. Since any loan candidate is a potential liability, this number gives the likelihood of you becoming a liability to the lender by not sending your payment promptly each month.

It is incredibly important that you maintain your credit score and credit report. You can check your credit score for free at least once per year with the three largest credit bureaus in the United States. And some credit card companies and banks also have programs that allow their customers to check their credit score for free. You should definitely check on your credit score periodically. In addition to checking on your financial rating, this information will alert you to any fraud or abuse that may be taking place under your name. Identity theft is an incredibly serious problem that is currently plaguing this country in a time where so much personal information is available online. By monitoring your credit report, you will be able to immediately recognize signs of fraud and alert the proper authorities.