Why Be Cautious With Credit?
Credit can be a valuable tool—if used properly and with control. I see all the time about people that have completely smothered themselves in debt, and it really baffles me how people can be so careless as to forget to pay their bills and end up getting charged late fees and letting their account go delinquent so that they eventually get served to collections.
But, this obviously happens and quite often. America is a nation of debt. It is estimated that by the time that college students graduate they have accumulated several thousand dollars in credit card debt alone, not counting student and car loans. Imagine $10,000 of credit card debt, at a 20% per year interest rate, the average rate for credit cards nowadays. That would bring in $2,000 per YEAR of pure interest. That is a lot of money to be paying a bank for the privilege of using their money.
What is a Credit Score?
What is a Credit Score and Why Should You Care About It?
A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information, typically sourced from credit bureaus.
Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.
Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, employers, landlords, and government departments employ the same techniques. Credit scoring also has a lot of overlap with data mining, which uses many similar techniques.
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My First Credit Card
Capital One Credit Card
Barely after I turned 18 I received in the mail a "pre-qualified" credit card offer from Capital One. It was for a card specifically for those with no established credit, such as students and stay-at-home parents. I never had a credit card before then so I thought I would give it a shot and see if I would be approved. I was always interested in finance and money, so I thought this would be a great opportunity to learn about credit.About a week later I received an unmarked letter with my shiny new Capital One credit card inside-with a limit of $300. Nothing big of course to most people, but to me it was a landmark in my life and because I actually had a credit card of my own.
I decided that I would not use the card unless I had money in the bank to pay it off in full each month, so that I would not have to worry about having the money to pay it off if I needed to. I am a frugal person by nature, so I don't have much problem not buying anything that I don't have money for or don't need, anyway.
So, I used the card on a regular basis, making sure to pay it off almost in full each month, to avoid as little of a finance charge as possible and to build my payment history, and only two months later I received notice from Capital One that they had reviewed my account and decided that my payment history was so good they increased my credit limit to $500.
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Learn More About Credit
Credit Education Books
Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future
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Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future, 2nd Edition
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How to Repair Your Credit Score Now: Simple No Cost Methods You Can Put to Use Today
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- Debt_Man Debt_Man Nov 11, 2008 @ 10:48 am
- Nice and informative lens!
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Reply
- Wills_Smith Wills_Smith Aug 5, 2008 @ 7:31 am
- Bad Credit Auto Loan shoot out your dual financial duels. Specific configuration of these loans is to provide funds to those people who are in credit deficits along with unable to arrange collateral as security. You raise the fund without any loan security. And that is why the loan comes in the category of high risk loans.
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Reply
- Wills_Smith Wills_Smith Jul 25, 2008 @ 7:18 am
- A bad credit car loan is a kind of loan given to the borrower to pay for their car with a bad credit history background. As the lender is at a point of high risks in such loans, the interest rate is charged at a very higher rate in comparison to the other loans. Apart from that you need to do a lot of convincing to acquire a bad credit car loans. The higher chance of attaining the loan is by providing collateral.
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