Credit involves receiving something of value now with the promise to pay it back later. When you borrow money used to purchase goods and services, you’re borrowing money on credit. You receive this credit from a credit grantor, whom you agree to pay back the same amount that you spent, plus additional finance charges (interest) at an agreed-upon time.
There are 4 types of Credit
With revolving credit, you’re given a maximum line of credit. You can run charges up to that credit limit. Each month, you carry a credit balance and make a monthly payment. Most credit cards are a common form of revolving credit.
Charge cards are similar to revolving credit cards; however, they differ in their payback requirements. With charge cards, you must pay back the total balance every month rather than making steady monthly payments.
With installment credit, a credit grantor loans you a specific amount of money. You agree to repay the full amount plus interest in regular installments of the fixed amount over some time.
With service credit, you arrange to have extended utility services paid on credit. You can receive electricity, water, heat, club membership, cell phone service, etc. with the agreement that you will pay for these services each month.
Why is Credit Important?
Credit is necessary if you plan to use credit to make a major purchase or take advantage of the convenience that credit can provide. The importance of having good credit extends far beyond making purchases. It also affects how your potential employers and landlords view you based on your financial stability.
Your credit report includes information that could determine whether or not you can purchase your dream home, finance a car, own a small business, etc.
Some Facts About Credit
Understanding credit is essential when considering a credit repair solution. Your credit score is your entire financial reputation consolidated in a number between 300 and 850. Credit grantors review credit applications and credit reports to determine whether or not you are a financial risk.
Having good credit suggests that you are financially responsible and that you will pay back whatever you borrow. Having bad credit, however, indicates the opposite.
Credit grantors may consider the following aspects when granting a loan:
- Your income
- How long you’ve lived at your current address
- How long you’ve worked for your present employer
- What kinds of assets you have
- Your bank account balances
These aspects are crucial when determining if you are an ideal candidate for a loan. However, the primary source that guides their decision is your credit information.
We’re here to help every step of the way