5 Things You Must Know About Financing Credit

Introduction

If you buy an item today with the promise of paying for it tomorrow you are using financing credit. The use of credit can be very helpful when one is faced with unpredictable financial constraints. However, before you can receive credit, a lender must first believe that you can pay back the amount. This is what is called credit trustworthiness. Lenders will use factors such as credit, employment and salary history to determine your credit trustworthiness.

Step 1

How does it work?

There are a number of sources through which borrowers can access financing credit, the most prevalent being banks and credit unions. A lender will use your identifying information, such as your social security number, to crosscheck your credit history. Once they have established that you are a worthwhile borrower, they will extend credit to you. The lender will draft the guidelines on how to use the credit. The terms will include the cost of using their credit, what happens if you are late on your payments and how often you should send payments for purchases. A credit limit is then established, and this limits how much credit you can use. This is based on your credit history. The lender will give you the means by which to spend your financing credit, such as a credit card. They will also send you a billing statement detailing your credit purchases, the interest rate charged, the minimum payment due and the payment due date. You should always ensure to make your payments on time to avoid penalties.

 

Step 2

Tips on How to Use Financing Credit

Charge only what you can afford to pay. Get into the habit of charging only what you can pay. This will show lenders that you are responsible, and it will make it easier for them to lend you in the future. It will also help you avoid excesses.

Start with only one credit card. The more credit you have the more you will end up using it. Avoid accumulating credit cards. Learn how to be responsible with one credit card before you apply for many.

Pay your balance in full and on time. Paying off your balance each month shows that you are capable of paying bills, which is what lenders want to see. Paying your credit balance in time will improve your credit score.

Tips

Use only a small part of the financing credit that you have: Lenders tend to believe that those individuals who max out their credit cards often have a difficulty paying their loans. This will in turn have a negative impact on your credit score.

Carry a balance the right way: If you make more than the minimum payments each month, you will clear your balance as quickly as possible. If you remain with a balance, avoid making late credit card payments and continue to keep your balance at a reasonable level. If you keep this in mind, having a credit balance will not hurt your credit worthiness.

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