In today’s economy, it seems unlikely that someone would ask that question, but it never hurts to provide consumers a definition. Also, you may be surprised to find out that some people can not answer that question. Let us try and provide you with a clear definition of what is credit.
Credit is basically your commitment to repay borrowed money at a later date. For example, if you buy a house, you are using the bank’s money to pay for the house. You are committing to the bank that you will repay that money by making your monthly mortgage payments. How the bank makes money is by charging you interest and charging you certain fees when loaning you the money.
To have “good” credit means that you are showing you are responsible for making your payments in full and on time. Having “bad” credit means that you not being responsible in making those same payments either on time or by paying the full amount due each month. A good credit history can help you get additional loans, jobs insurance and other items. Everyone needs to have some credit so that they can live. Without any credit, you will pay quite a bit more for most things. Mortgages, auto loans, and insurance are just a few things that credit will help determine how much you are going to pay for them. But even if you don’t have a mortgage, most people who are renting are finding that their credit will determine how much they are going to pay or even if someone will rent to them.
If you have “bad” credit then you should know that your life could be very difficult so you should work each day to help your credit history. Starting with good credit is best but when that is not possible, it is important that you get involved with Credit Repair and clean up your credit history. Then you can work to help your credit score in many different ways. It is important to work on your credit so that you have the right balance of credit. This balance will show lenders that you can manage your credit well. This management is what increases your credit score.
There are advantages and disadvantages to credit. Credit (especially credit cards) makes life more convenient because it allows you to purchase items immediately that you don’t have enough cash to purchase the item outright. But the disadvantage is that you will be paying extra to borrow that money. Interest is very costly and can run high especially on credit cards. Another disadvantage is that you will be spending money that technically you don’t have. This debt can continue to increase and may build up making it harder and harder for you to pay the borrowed money back.