How Credit Works
How credit works is that you borrow money, you pay it back on time so that you can build up a good history, you borrow more money, you pay it back, again on time, so that your credit history stays positive, and now you have credit, right? Well, that is the gist of it. How credit works also influences your life in other ways than just providing a means of borrowing money.
Building Trust Acting as proof of trustworthiness is an important example of how credit works, especially if you are interested in working in the field of financing. If you can show that you use credit wisely, and protect your credit history, a prospective employer is more likely to consider you for a position.
Loans Another example of how credit works becomes apparent when you go to apply for loans. If your credit record has too many negative entries, you are most likely going to have problems borrowing money. That is why it is extremely important to maintain a good credit history.
Credit Report One way to do this is by examining your credit report at least once a year, and immediately reporting any discrepancies and/or disputing any entries you believe may be incorrect. One of the three credit reporting companies—Transunion, Equifax, or Experian—can provide you with a copy of your credit report.
Having a good idea of how credit works both in theory and for you is something that you will be able to utilize throughout your life. As your life progresses and changes, so, too will your credit needs. Continue to learn how credit works for you as you go along, and protect your credit as well as you can. Don’t overextend yourself, and don’t be afraid to ask for help if you see you are becoming overwhelmed.
Posted on: Feb. 26, 2010