Managing Credit
Credit means using someone else’s money to pay for things. In
return, you promise to repay the money to the person or company that
loaned it to you. A loan of any type includes both the principal—the
amount of money borrowed—and the interest charged for the privilege
of borrowing the money.Credit can be a useful tool. It enables people to purchase large items that few can afford to buy with cash, such as homes, cars, and education. If you make credit payments on time and repay your debts as promised, you build a good credit record. A good credit record means you are reliable in paying your debts, and other lenders will likely give you credit in the future and charge you reasonable interest. A poor credit record can affect your ability to make future large purchases. You may be ineligible to borrow at all or you may be charged higher interest rates for your borrowing. Without credit, you will need to pay for everything with cash. You can rebuild your credit record, but it could take a few years. Keep an eye on your credit report. Credit reports are compiled by national credit-reporting agencies. The typical credit report includes identifying information, credit information, public record information, and inquiries. It’s a good idea to order your credit report once a year to make sure there are no errors on it. If errors do appear, you have the right to have the mistakes corrected at no charge to you. Some states have a law that requires credit-reporting agencies to provide you with one or two free copies of your credit report every year. If your state is not one of them, then you may have to pay a small fee (about $10) to obtain your credit report. RESOURCE—CREDIT REPORTS |
