How Credit Works
An Introduction to Credit
Credit in the financial world is when you purchase products and services and pay for them later. Credit can be summed up as the amount of trust financial institutions and other credit lenders have in your ability to have money lent to you and paid back in a given amount of time. There are hundreds of different types of credit products, the most common are: credit cards (Visa, MasterCard, American Express etc.), loans (such as: personal loans, car loans, lines of credit) and mortgages.
When speaking of credit, interest and rates go hand and hand. Interest is occurred when you spend the money that was lent to you via a credit card or loan. For instance, when you use your credit card you are given x amount of time to repay it (typically 30 days) if in that time you are unable to repay the amount in its entirety then the lender will charge a percentage (rate) of what you owe that you are responsible to pay back over and above what you have borrowed.
How to Build Credit
Credit is built up over time by establishing your credibility with credit lenders like your bank. If your having difficulty qualifying for a major credit card, try a department store or consider asking someone you know and trust to co-sign for you (co-signing makes the other individual involved in your credit application and responsible should default on your payments). You establish and build up your credit rating by making payments constantly on time and at the requisite amount.
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Credit Articles
- Introduction to Credit
- Credit Reports
- Credit Grades and Ratings
- Credit Bureaus and How they Work
- Lenders and Your Credit Report
- Get Your Credit Report
- Errors with Your Credit Report
- Improving Your Credit Rating
- Credit Fraud
- Credit Fraud Prevention
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