Understanding the Function of Credit


What is Credit?

Credit is the backbone and the engine behind the workings of the economy. Credit simply allows individuals and companies to borrow funds in good faith and pay it back over a specified time frame. Lenders base their decisions on who they should lend to by using your credit rating.

Your credit rating is a numerical score that is based on your payment history. From your credit cards and loans right down to your phone bill, you will find a recording of each payment. It reports whether you pay your bills on time or if you are constantly late. And if you are frequently late, it records the amount of time taken to make that particular payment. Your credit report is pulled (viewed) every time you apply for a loan, credit card and even to have a phone line installed.

Good Credit vs. Bad Credit

How important is it to have clean or good credit? It's very important because the worse off your credit is the harder it will be for you to secure a loan of any sort. It is important to keep on top of your credit finances and make sure that every payment is made on time and always make sure that you pay at least the minimum amount but always try and pay more if you can.

If you currently have bad credit, you shouldn't worry too much as there are ways to still secure a loan such as having a cosigner. If you choose to go this route, remember that you are both responsible for the loan as it will be taken out in your names. Also, there are many institutions that work with people with bad credit and they will assist you with the repair of your credit file. Here's a list of a few companies to assist you:

CreditAxis.com, DebtAdvocates.cc, Lexington Law Firm and more. Simply go to your favourite search engine and type in "Credit Repair" and see how many companies show up in your search. Warning: Be wary of those companies that promise to repair your credit promptly - ie "3 months or less". Credit repair takes time, so do your homework before you commit to one company to assist you.

Your Credit File

If you have bad credit, the first step to repairing it is to pay off all of your bad debts. This is debt that is overdue and not up to date. You may not know this, but this information may stay on your file for up to 7 years. To assist you in this, I suggest that you get a copy of your credit report from one of the credit reporting agencies such as Equifax. Look it over thoroughly because you may find some mistakes which can be easily corrected with either a simple phone call or with supporting documentation.

Sheldon C. Smith is the owner of http://www.sheldoncsmith.com, a site dedicated to keeping the public informed and educated about the mortgage and credit process.

MORE RESOURCES:
RELATED ARTICLES
Using Credit Cards Wisely
"I think money was stolen from my card" or "I might have blocked my card in the ATM" - these are frequent problems that bank customer-support officers usually hear from agitated clients. Incorrect use of credit cards or wrong interpretations of their functions are frequent even after tens of years of credit-card extensive use.
Important Things to Know About Divorce and Credit
Joint debts remain joint debts.Both spouses signed a legally binding contract with the creditor, and a divorce decree neither amends this contract nor relieves the creditor's investment in you.
What Does Your Credit Score Tell You?
When you apply for a loan or a mortgage, the first thing the lender does is to check your credit score. Based on your credit score, the lender decides the amount of finance you are eligible for and the interest rate at which you will be charged.
Establishing Credit - What You Need To Know Part 1
Establishing credit is one of the most important things you can do in order to add stability to your financial record and dramatically increase your ability to borrow necessary funds in order to purchase a new home, new car or even pay for college expenses. Unfortunately credit has two sides to it that consumers can exploit.
Learn How to Improve Your Credit Score
Having a damaging credit record can hurt you in many ways. It may prohibit you from making an important purchase such as a home, car, computer or vacation.
Credit Reports - Why Your Credit Score is Important
If you have never heard of a FICO score before, you should become familiar with the term. Named for the firm that invented it, Fair Isaac Corp.
Credit Repair Scams
"Erase Bad Debt !""Remove Negative Items From Your Credit Report"You've probably seen these headlines and others just like it promising to clean up or "fix" bad credit. For someone who suffers from a bad or poor credit rating, these headlines are certainly an appealing offer.
I've Heard About FACTA; What Does It mean?
What FACTA means is that if you, as an individual, lose the information on anyone you have ever hired; or, for any business in the United States of America that collects any personal information on people, if the information should be lost due to not destroying the information properly, then two things can happen. First, there are federal fines of up to $2,500.
Always Avoid Payment Holidays
Once you've been paying off a credit card for a while, you might be offered a 'payment holiday'. You'll get a letter, saying that since the company knows it's difficult for some families around Christmas (or whatever other excuse they think up), they're offering you a month off from paying, as a 'special present'.
Legislators Ponder New Credit Protection Laws
Legislators in Washington, D.C.
New Law Provides Free Annual Credit Report
As of Thursday, December 1, 2004, one-third of Americans will be able to access their credit reports from all three main agencies for free. Passed in late 2003, the Fair & Accurate Credit Transactions Act creates a central source consumers can use to obtain a free annual credit report.
Minimize your Risk for Identity Theft
Identity theft is the fastest growing crime in America. According to the Federal Trade Commission, the number of identity theft incidents reached 9.
It Takes Credit To Build Credit
Using a credit card wisely is an important step in building a good credit rating. If you're trying to re-build your credit or if you're young and just starting out, pay close attention the next time you receive a new card offer in the mail.
How To Prevent Fraudulent Credit Card Transactions
What Are Possible Signs of Fraudulent Transactions see at Web Hosting Companies?Customer wants to pre-pay for a yearDomain Name Registration for 5 years or moreOrders using free email address providers like Hotmail, Yahoo, etc.Usage of multiple cards to complete order.
Different Ways to Borrow Money
There are many different ways to borrow money. Outlined below is a useful guide to some of most common ways of borrowing money.
The Easy Way To Gain Access To Your Free Online Credit Report
When you apply for credit, those lending you the money want to know if you are going to pay them back. One way they decide if you are a good risk is to see how you've dealt with other people's money.
Searching For A Low Interest Credit Card?
These days, people need to very carefully consider what type of credit card they will carry in their wallets. There are so many options out there, and each individual has different needs.
Useful Tips on Borrowing Money
Here are some useful tips on borrowing money. Borrowing money is one of the most common sources of funding for a small business, but obtaining a loan isn't always easy.
Figuring Out the Ever Nebulous Numbers Called Credit Scores
Credit Score FactorsThe information contained on our credit reports affect every aspect of our lives; including employment, insurance, and even interest rates (mortgage, credit cards, automobiles, etc.).
The Best Strategy To Erase Credit Card Debt
Credit card debt is a growing sickness in the United States and Europe. It is very important to eliminate debt and take control of your financial health.