Taking Excellent Care of Your Future and Credit Debt Part 1
Your life’s biggest goals, sometimes comes with HIGH PRICE-TAGS! So, ask yourself how much is your dream could cost you?
Even if you’re unsure of the exact cost, in your mind, it’s difficult to have enough to pay in cash.
But then, CREDIT comes in! It lets you borrow money to cover your other major expenditures. However, you need to consider how will you payback the principal amount, PLUS the interest amount that goes with it. Unless you are assured of future funds the loan, better think twice, if only to protect your credit-worthiness.
Availing credit to finance major goals, may be necessary. In any situation, one usually take out a loan to be repaid over several years.
But, take note that using credit for everyday purchases that’s not affordable will put you into big trouble.
Getting into credit is not so easy. Why?
Unless you pay off your credit card bill in full, you’ll be charged interest on purchases. These costs can quickly snowball even if you’re only a day or two late – you’ll charged a late fee.
How does a lender decide if you are qualified to get a loan?
The lender will gauge creditworthiness and heavily rely on what’s written on the credit report which is done by Credit Reporting agencies. This report tells a lot about your history and past use of credit. They create a credit report for each person in their files. The information about you includes:
– Whether or not you’ve paid bills on time
– How much you’ve borrowed
– What part of your available credit you are using
– How long new applications for credit you’ve made
– You’ve used credit and the kinds you’ve used
– Whether you have ever defaulted, or failed to pay
Any lender you asked for a loan or credit card can check your credit report to determine your eligibility for credit. From the details in the report, the credit reporting agencies also determine credit score, lenders can see, too. Lenders use credit reports/scores — as important factors when deciding to lend you and what interest rate to charge. The fewer problems there are in your credit report, the higher your credit score will be. The higher your score, the more likely you’ll qualify for credit with better interest rate.
Lenders aren’t the only ones who check your credit report/score; potential employers, landlords, cell-phone providers, insurance companies, et.al.
So what can you do to make a good impression?
You might not think of using a credit card as borrowing. But as soon as you make a purchase with it, you have spent money that you must repay to the lender with interest — usually a bank or credit union — that issued the card. It’s best to use credit cards only when it’s important, like when you can’t use cash. Probably the only good reason to use a credit card is to build a strong credit history.