What Is Credit?


Credit is more than just a credit card made out of plastic, you use to purchase merchandise and services with, but it is also your financial trustworthiness. Having credit that is good means that your payment history, salary and employment, make you a good loan candidate, and those who provide services or lend money, will be more willing to work with you. Having a credit rating that is good usually results into having lower payments and makes it more easier to borrowing money. However, having bad credit can be a big problem. It usually results from borrowing too much money or making late payments, and it means that you might have trouble getting a credit card, a car loan, mortgage loans, renting a apartment, and sometimes a job.

Most types of creditors evaluate your credit record by using your credit score. This involves using your credit report and credit application to get information about you, such as your outstanding debt, annual income, bill paying history, and the types and number of accounts you have and how long you have had them. Potential lenders use your credit score to help predict whether you will be a good risk or bad risk when it comes to making payments on time and to repaying a loan.

Many people just starting out have no credit history and may find it tough to get a credit card or loan, but establishing a credit history that is good is not as difficult as it seems. Below are some steps that can be taken to establish a good credit rating.

1) Local businesses are more willing to extend credit to someone with no credit history, so you may want to apply for a credit card issued by a local store. Once you establish a pattern of making your payments on time, major credit card issuers might be more willing to extend credit to you.

2) You might also apply for a credit card that is secured. This card will require you to put up the money first and then lets you borrow fifty to one hundred percent of your account balance.

3) You might ask other people who have an established credit history to co-sign on an account. By co-signing, the person is agreeing to pay back the loan if you don't.