Credit is such a common thing in today’s world that we don’t always realize exactly what we are getting into when we decide to take it out.
However, taking out credit is a serious commitment, one that can, in fact, have lasting ramifications for our lives. Therefore it’s important to know as much as possible not only about the particular credit situation but also about how credit works in general before we jump in with both feet.
Luckily, that is something you can read more about below.
What do we mean by credit?
Credit is in its essential for money that is loaned to you to buy a product with. You never actually see the money in your account though, like you would do with an actual loan. Instead you credit has its own account onto which purchases are charged.
What the thing will credit is, unless it’s interest-free, that there is a cost involved simply to borrow this money. This is a charge known as interest and is usually expressed as a percentage of the loan.
What’s the big deal about interest rates?
An interest rate is simply the figure of the percentage mentioned above. It basically dictates how much extra is added onto the money you borrowed each time you have to make a repayment. Of course, this means that the higher the interest rate, the more money you will pay back.
It also means that the longer it takes you to repay the credit loan, the more you will pay back because the figure is always calculated on what is outstanding. Something that can mean an initial loan for a minimal amount can quickly spiral into a weighty debt that is incredibly hard to shift.
That is why many credit cards offer 0% balance transfer to new customers as a way of enticing them from their previous providers. After all, it means the additional cost on the credit loan will stop for the duration stated, something that can save the individual a lot of money in the long run.
Also, it’s worth noting that credit rates (APR) are not centrally fixed. This means that different providers can charge varying amounts. It’s also likely that the APR you get will be based on what your credit score is too.
So I have a score?
Yup, everyone has a credit score that consists of three numbers from 000 to 700. The larger your numbers, the better your score. This matters because a high score means two things.
First, it signifies to a provider that you are a better risk for a loan, because you are more likely to pay it back. This makes credit easier to get. Secondly, it will usually provide you with a credit loan offers with lower interest. Something that means you will end up paying a lot less money back in total.
What happens when I have a bad credit score?
When you have a bad credit score, one that is rated from 000-300 (approx) things can get difficult. This is because of all the essential things in life that we need a credit check to do, such as buy or rent a home or a car, or take out a loan when we are in a financial emergency.
Luckily there are some other options like the New horizons bad credit loan that can be issued without going through a credit check. Something that can really get you out of a tight financial jam, even if you do have credit issues.
How can I repair my credit score?
Of course, the most preferable action here is to try and repair your credit score and raise it as high as it will possibly go. To do this, you will need to know what adversely affects you score like late payments, defaulting on debts, and even applying for multiple loans in a short space of time. Then you can avoid doing these things in the future, which can slowly help to rebuild your credit over time.
Although, if you are already at a place where a credit score is causing problems, you have a particularly complicated credit history, or there are some difficult issues to resolve its best to call in the services of a credit repair agency.
They can then advocate directly with the companies involved and help to get any notes or marks on your credit account closed off. Something that can help to significantly raise your credit score and make any financial transaction that involved credit much easier in the future.