Credit is defined as an agreement between a borrower and a lender in which the borrower receives something that is of value to them now, and agrees to make payments on it later. Generally there is interest added into the value that the borrower has received. A consumer, or borrower, has a line of credit. This is the amount of money that is available to them based on information about the consumer. Lines of credit may either be secured or unsecured.
Many times it can be hard to obtain credit if you have never had any. Most financial institutions are not just going to hand over a large sum of money without making sure you are good to pay it back. This is where you need to make sure you have good credit history. Many think that they do not have a credit history at all but are surprised to learn that they really do. If an individual has a membership to a local place of business or has any loan, this will be on the credit score.
The first step in checking your credit is to obtain a copy of your credit report. You can get a free copy from any of the three major credit bureaus: TransUnion, Equifax, or Experian. Federal law states that each individual is entitled to one free copy once a year from each of these credit bureaus.
If one wishes to make their credit score more appealing, there are many things that can be done. Consider any of these steps in making a credit score work better for you.
Lenders look at many factors when a consumer applies for credit. There are 3 C’s for good credit history: Client history, collateral, and capacity. Lenders will look to see if bills are paid on time each month, how much, if any collateral there is to repay back the loan in case payments are not made, and the ability to pay back what the consumer owes based on what their financial situation is.
Once you have established your credit, it is very important be responsible with it. The following are tips on how to maintain good credit.
If you are wondering how much credit you can really afford, there is a simple way to figure it up. Take your monthly fixed expenses, such as rent, loans, credit card payments, etc. and divide that by your monthly take home pay. This will give you your debt to income ratio. This number should be below 28. Anything higher than this could mean denied credit or having to pay a higher interest rate.
Credit is something that everyone will have in their life. Good credit can be obtained easily by being responsible, and following the tips that are listed above. Use your credit wisely and you will be sure to get the best deals around town.
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