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What is credit?
Credit is a privilege and a convenience. Credit lets you charge a meal
on a credit card, pay for an appliance on an installment plan, take
out a loan to buy a house, or pay for schooling. Credit allows you to
make a purchase without ready cash.
A credit card enables you to buy things now and pay for them later.
You get credit by promising to pay in the future for something you
receive in the present. But, there are strings attached to credit.
Credit usually costs something, and what is borrowed must be paid
back.
Why do I need credit?
Credit gives a number of benefits you don't get when paying with cash
or checks:
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.
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What is a credit report?
When you apply for credit, the lender reviews your credit
report before approving your application. The three major credit
reporting agencies are Equifax, Experian, and TransUnion. 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 the credit report.
Why is it important to
establish a good credit history?
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 that are 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. That's why
it is so important to establish a positive credit history.
How do I establish a good credit history?
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.
How
Low is your Rate?
I have some credit, how can I
establish more credit?
Paying off a furniture loan, having a department store credit card, or
even paying off a student loan may establish a credit profile on the
credit bureau for you. The most convenient type of credit is a
credit card.
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Should I check my credit report?
Reasons to Check Your
Credit Report Regularly
In much the same way that a resume displays your work
experience to a prospective employer, a credit report provides
prospective creditors (and in some cases employers and insurers too)
with a detailed picture of your credit history. And like a resume,
your credit report can influence whether you will receive what you are
applying for. Ideally, your credit report is an accurate, up-to-date
reflection of your credit history. However, since we don't live in an
ideal world, there are many reasons that your credit report could
contain inaccuracies that might prevent you from receiving the credit
you deserve. The good news is you can take action to keep your report
accurate. Here are the top five reasons why you should make a practice
of regularly reviewing your credit report:
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Inaccuracies Mixed Credit Files
Many inaccuracies on a credit report
can be the result of simple human error, and are therefore are not
difficult to dispute. Of course, if you don't order your credit
report, you might never know about it. Whether the inaccuracies relate
to payments not credited, late payments, or data mixed in from the
credit file of someone else with a name similar to yours, you will
want to contact the credit bureau to dispute inaccurate information
promptly. If you would like to get a copy of your credit report
right now, Get a free copy of your credit report right now
Free Credit Report
Tracking Payments
One of the
most important elements of credit is a demonstrated history of on time
payments. Once you send the check though, anything can happen--a delay
in the payment being received can kick you over to a 30-day
delinquency. If you call your creditor and explain the situation, they
might adjust the information. Of course, if you don't read your credit
report, you won't necessarily know which payments are being received
and reported properly.
Identity
Theft
This issue
alone is reason to order your credit report immediately. Identity
theft is an insidious crime, involving a thief who assumes your name
to open new accounts, divert your card statements to another address,
and run up all sorts of bad debt without you ever knowing about it
until collectors come calling. Over time, identity theft could
jeopardize your ability to obtain further credit. The best way to
catch a thief who is using your name is by getting a copy of your
credit report, which will show you if there are accounts listed you
know you haven't opened. For example, if a thief has intercepted a
pre-approved credit card offer in your name and sent it in with a
change of address, your credit report will include the account.
Inquiries
If you're
shopping around for a loan or more credit, you should know that when
creditors check your credit, it places an inquiry on your credit
report. Inquiries can add up, which is often interpreted as a negative
by creditors. For this reason, too many inquiries can actually make
getting credit more difficult. Moreover, if you didn't authorize
someone to look at your credit report and they did, they may have
broken the law. I
Credit
Fraud--Unauthorized Charges
Credit
fraud involves the theft of your credit card or account number to make
unauthorized charges to your account. Though consumers are protected
financially from this abuse, other creditors may take note of all this
activity and decide to raise your interest rates or refuse to grant
you a loan. Ordering your credit report will help you catch new
activity on accounts that you haven't been using, or may have closed.
When it
comes to managing your credit worthiness, your credit report is your
best resource. Ordering your credit report gives you the opportunity
to manage your credit wisely today, while planning your credit
strategy for achieving future goals--a credit-savvy move every
consumer should make!
How can I fix bad credit?
Without credit it is difficult to buy items online, reserve
a rental car, buy a house or even rent an apartment. Bad Credit
can reduce your ability to gain employment. Credit repair agencies and
attorneys charge from hundreds of dollars to thousands to "fix" bad
credit or remove erroneous listings Some actual bad listings can be
negotiated with debt consolidation.
Low cost online credit repair source
Credit Repair
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