What is Credit?
 Credit,
derived from the Latin word "creditus"
which means "to believe" is defined
as trustworthiness or credibility.
Fundamentally, credit is an act of faith between buyer and seller. Credit
is used to purchase both goods and services without immediately paying
for them. This includes credit cards, personal loans or mortgages, and
familiar services such as your telephone and cable.
As our society moves further away from cash, your daily finances become
more dependent on credit. By way of trust and credibility, our economic
society works more smoothly and conveniently.
The credit system is open to all. If you choose to use credit with good
responsibility, its power will increase with use. If you misuse it, the
power will decrease. Like anything based on people's faith in each other,
credit is both a fragile and a precious thing.
How to build a credit history.
The way credit is established today is by building a history of borrowing
and timely debt repayment. That's why, if you are just starting life as
an adult, the best thing you can do is to borrow some money and pay it
back on time. If used responsibly, the credit card is certainly
a good tool for establishing your credit and has its advantages. It's
more widely accepted than a check and much easier to carry around than
cash. It also comes in handy when you need funds in an emergency.
Why is a Good Credit Rating Important?
Your credit history is going to be reviewed every time you apply for
credit, to make a major purchase such as a car or house, or when you lease
an apartment. A poor credit history can cause a business to deny you credit.
If you declare bankruptcy, this can be on your credit report for ten years.
Information about a judgment or lawsuit against you can be reported for
seven years or until the statute of limitations expires, whichever is
the longer period. Good credit opens many doors to opportunity, whereas,
bad credit closes those doors.
Your Credit Report
Your credit history, a record of your current and previous payment patterns
pertaining to your credit promises, is contained in a file which is maintained
and sold by a credit bureau. If you ever applied for a credit or charge
account, a personal loan, insurance, or a job, then you have a credit
record on file at a credit bureau. A credit record typically contains
information on your history of paying your credit bills, your income level,
and the amount of your debts.
You should check your credit annually.
Sometimes people think they have good credit. Then they apply for a loan
and are surprised to learn that there are some problems with their credit.
The best way to find out if you have good credit is to get a copy of your
credit report. It's a good idea to order your credit report once a year
to make sure there are no errors on it. If there are errors or outdated
information on your credit report, it could hurt your chances of getting
a new loan. Studies have shown that many credit files contain inaccuracies
that can harm your credit rating, leading to rejections when you apply
for loans, insurance, even a job. Often the result of simple human error,
they can be caused by anything from a clerical error to a computer glitch
in which your file is mixed with that of someone with a similar name.
It pays to check your credit report regularly.
More Information:
 Credit
Report
How
to Get a Credit Report
Credit
Bureaus
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