How to Build and Maintain Your Credit
Understanding the Basics
Credit is an important part of our economy. Without credit many people would not be able to make large purchases. Through the use of extending credit, people can finance the purchase of homes, cars, recreational vehicles, furniture and a host of other items. Generally, the credit is extended to people in the form of a loan with the understanding that they will be repaying the loan back within a set period of time, and paying the loan with an agreed upon rate of interest. By setting a set length of time and interest rate, the monthly payment can be calculated.
- Credit and Loans - informative set of resources and articles from the FTC dealing with issues surrounding credit and loans.
- Credit Information - useful site providing consumers with information on topics of importance in granting credit.
- What is Credit? - definition of what credit is and how it works in the economy.
- How Credit Works - educational site providing students and consumers with knowledge on how credit is granted and how it works.
There are many factors which go into establishing an interest rate and length of repayment. One factor is the purpose of the loan. For example, purchasing a home generally involves a great deal of money and in order to afford repaying the loan the Mortgage Company will extend credit for up to 30 years, and in some cases, longer. The purchase of an auto can still be an expensive undertaking and loans can be up to 6 or even 7 years. And, the financing of furniture or appliances involve lesser amounts of money and therefore will involve shorter periods of time to repay the loans.
Establish Your Credit History
One of the most important aspects of extending credit is the existing credit history that the borrower has established previously. A good credit history is a valuable asset for borrowers. Generally, lenders will only lend money to reliable borrowers who have established a good history of repayment. In addition, borrowers will good credit will also pay lower rates of interest than borrowers will poorer credit history. This can help save borrowers hundreds or thousands of dollars depending on the amount and term length of the loan.
- Good Credit History - helpful site for consumers providing them with an overview of credit and why it is important to establish good credit.
- Credit History - informative website which helps people make wise decisions in financial and credit dealings.
- Credit History and Social Security Numbers - information on the importance of keeping confidential information such as your Social Security Number private.
- Credit Report - useful site which has information on credit reports and how you can find out what is in it.
- Your Credit History - article providing a look at what is a credit history and how it can affect your future.
- Credit History Defined - helpful information on what is a personal credit history and how it changes.
Find Out Your Score
One of the more recent developments in credit lending is the establishment of a credit score. A credit score is a three digit value that represents the past history of a borrower in regards to repaying past loans. Many factors go into a credit score. They include length of borrowing history, types of credit that have been granted, payment history, how much money is owed and several other factors. The result is the credit score where the higher the three digit number, the better credit risk. This would result in lower interest rates on loans.
- Your Credit Scores - information on what is a credit score, what it consists of and how it can be affecting consumers.
- Free Credit Reports - useful government site explaining how consumers can receive free copies of their credit reports annually.
- Credit Scores and Factors - information on what goes into a credit score and the wide-ranging effect it can have for consumers.
- Credit Scores Answers - helpful collection of questions and answers on credit scoring.
- What's in Your Credit Score - educational information on what is contained in your credit score and how it is calculated.
- Credit Score Calculator - site providing an estimate of your FICO credit score.
Credit scoring has become more popular in recent years. Scoring models are used not only by lenders but by others as well. Many employers are using credit scores and credit reports to find out the financial past of potential employees. A negative report may result in the applicant not being hired. Insurance companies are also starting to look at credit when determining rates and eligibility. A lower credit score will result in higher premiums.
A good credit report can be the difference between getting a loan, getting a new job or even getting insurance coverage. A good credit report will also result in a savings over someone getting a loan with a bad credit report and score. This saving can be substantial for borrowers.
Improve Your Score
Because of the importance of credit scores, people should be concerned with getting and maintaining a good credit report. But even if your credit score is not top quality it is not too late to improve it. Credit scores and credit reports are evaluated on a regular basis and it can be improved. Some ways to improve your credit score include making payments on time, paying amounts greater than the minimum payment, not taking too many new credit accounts or inquires and consolidating loan expenses when possible.
- Improving Your Credit Scores - helpful site providing easy to achieve tips to improve your credit score.
- Improve Your Score - information on how consumers can plan and execute improving their credit score and report.
- Improve Your Credit Score - informative resource from one of the major credit reporting agencies providing tips on how to improve your score.
- Boost Your Score - tips on how your can easily improve your credit score.
- Increase Your Credit Score - help on how consumers can simply and easily improve a credit score and rating.
We hope that this information was helpful to you in understanding the importance of credit, credit reports and credit scores. We hope that this has taken the mystery out of credit and have provided you with some tips on how to improve your credit so that the next time you need a loan you will save money.