Summary of Credit
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Summary of Credit
Credit is a financial transaction in which a creditor lends money to a borrower expecting that the borrower will repay the full amount of money borrowed in a certain amount of time, with additional money for interest or finance charges. Credit is important to the smooth operation of the economy. But credit abuse is harmful to the economy and the individuals in such transactions.
Although creditors take steps to determine the creditworthiness of a debtor, the process is not perfect. Consumers should get their credit reports to be sure that information on file is complete and accurate. If inaccuracies are found, they should be reported to the credit bureau.
Consumers should use credit to purchase necessary things for which they do not have sufficient cash available, but only if they will have the means to repay the loan and finance charges. This judicial use of credit will help the individual manage their cash flow better.
Things to do
- If you don’t have a credit card, apply for one, perhaps from a gas company, a store, or your bank or credit union.
- Use your credit card every month. Make small purchases and pay them off to show that you can handle credit responsibly.
- Use online banking to pay your credit card balance automatically each month.
- If your credit is bad, take some initial steps to build it up, such as opening a savings account or paying off past-due bills.
- Dispute any mistakes in your credit report, and add any missing positive information.
- Contact your creditors for any debts you think you will fall behind on. Work out a payment plan for them.
What you have learned
- What Is Credit?
- Credit Cards: How Do They Work and How Should You Use Them?
- Choosing a Credit Card
- Your Credit Score: What Is It and Why Is It Important?
- The Effects of Bad Credit
- Loan Application and Credit Score Activity
- Tips for Improving Your Credit and Credit Score
- How Collection Agencies Work
