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CREDIT |
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What does it mean to get a loan? How do I make payments? What is a credit rating? How do I keep a good credit rating? How do credit card companies make money? Can I buy a car on credit? How does a mortgage work? How does interest work? |
Most people have a lot of questions when it comes to credit and how to use it appropriately.
There are those who never want a credit card.
They know how easy credit cards make it to spend money.
They also know that the interest they pay does not not help them save on their
purchases in the long run.
There are others who have "No Fear."
They spend over their budget on foolish items.
Sometimes they are known to make credit card payments with other credit cards.
These folks quickly become deep in debt and may have to claim "bankruptcy."
All your good and bad credit information is recorded and filed with credit
agencies.
When you give permission to potential credit lenders to view your "credit
history"
they check to see if you can be trusted to pay back their money.
Credit definitely has a good side and a bad side.
However, if you can find a healthy balance, you will discover that credit
cards are
useful in emergencies and in between paychecks.
If you pay them off right away they help you build up a good credit history
as they show
potential lenders that you are responsible and capable of paying back "borrowed"
money.
However if you are a person who puts things off you will end up paying a
lot of extra money on top of the money you borrowed.
This extra money is called "interest" and it can be as high as 25%.
If you borrow from "credit dealers" or "shady pawnshops"
who do not follow
government regulations you could be charged up to 300% interest.
For example, if you bought a stereo for $1000 you would have to pay the $1000
back plus interest.
If the interest is 10% you will end up paying a total of $1100.
If the interest was 25% you would end up paying $1250 for the stereo.
If the interest was 300% you would end up paying $4000!
Be careful, only borrow from organizations that have a good reputation and
always read the fine print.
To start building your credit history start off with a low (10%) interest credit card that has a $500 -$1000 limit. Use it to purchase regular items that you can easily pay off before the payment is due.
Loans are another form of credit that can help you with items that are extremely
hard to save for.
It would take you a lot of years to save money for a new car.
However if you apply for a loan and it gets approved you can drive the car
while you pay off the loan.
You end up paying a lot of interest in the long run but not if you consider
other transportation expenses
such as taxis.
Loans can be difficult to get if you do not have a good credit rating.
Before you apply take a look at your credit history to make sure it is correct
or needs to be repaired. Otherwise every time a company checks into your history
or denies you credit your rating goes down.
To get a copy of your credit history write to TransUnion
and they will send it to you free of charge
or you could pay for it online. Another company to contact is Equifax.
Remember use caution with your credit. You need to protect it today as your future depends on it.
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Page Last Updated:
April 12, 2006 12:58 PM
