What is Credit? You were provided credit if you have at any time borrowed money. Credit is you having access to someone else's money for the things you want. It also means that you agree to certain terms to repay this money that you have borrowed, usually with interest, whether it be to a company or to a person. A loan or credit should be considered as a legal obligation meaning that failure to repay it could lead to legal consequences. The reality is when somebody is interested in acquiring real estate for example unless they could pay for it in cash they will have to use credit to buy the property.
If you make your payments in a timely manner, you would have good credit. Having good credit is important because it makes it more likely that you can get a new loan in the future if you want to buy a home or a car. It gives lenders confidence in your ability to pay them back.
How do you get to know if your credit is good? There are times that people believe that have good credit without knowing what their credit situation or what their credit score is. I cannot say how many times people get shocked to know their actual credit score.The best way to find out your credit situation is through a Credit Report. A record of how you have paid your credit card debt, installment loans, and other debts, like utilities, doctor bills, insurance bills, etc is what constitutes a credit report. You can go to www.annualcreditreport.com and get a free report once a year to find out what is showing on your credit.
A credit report would consist of three reporting agencies.These are Equifax, Transunion and Experian. These agencies are not for sharing information with each other and they don't give or deny credit. Your creditors give them the information and they report it. It depends whether the creditors report to one or all three of the agencies.IT IS VERY IMPORTANT that you understand this!!!! assuming that you need to purchase a home and or are interested in trying to buy a home unless you have all cash you will be using credit to do so. Most people have had their credit checked when buying a car or furniture or getting a cell phone.WHEN YOU TRY TO BUY A HOME, A CREDIT CHECK IS DONE ONE ALL 3 BUREAUS.This helps to identify what may not be reporting on one of the bureaus so your credit score can be totally different when you bought that car.
The basic types of information that are included in all Credit Reports.
1. Identifying Information: your name, current in addition to previous addresses, telephone number, Social Security number, date of birth and current and previous employers. The applications you filled while applying for credit are the source of the information.
2. Credit Scores: a number of each of the agencies (Equifax, Transunion and Experian) generated based on a secret computer model.
3. Credit Information: This consists of information about your credit cards and other loans. The date opened, credit limit or loan amount, balance, and monthly payment are the constituents of this information. The report also shows your payment history during the past several years and the names of anyone else responsible for paying the account, such as a spouse or a so-signer. It also shows late payments and accounts turned over to collection agencies.
4. Public Record Information: Includes sources such as bankruptcy records, foreclosures, tax liens for unpaid taxes, monetary court judgments (such as lawsuits), and also overdue child support in some states. The federal, state, and local government public records are the sources of this information.
5. Inquiries: In the past two years, who are the people who had asked for your credit report and how often have you applied for credit.
Apart from your score, even the information that is showing on your credit report will determine whether you qualify for a car loan.It can determine if you qualify for a home. It could even determine how much down payment you may be required to do.In today's world, it is important to know what affects your credit.