consumer credit basics to manage your financial life
Your personal situation is different from someone else. The consumer credit services that works for someone may not be the best choice for someone else. You should take the time to understand all the consumer credit basics to find the best solution for your needs and goals.
What Is Consumer Credit?
Consumer Credit is simply the ability for a consumer to be able to borrow money in order to purchase a product or service. Borrowed money can take many forms, such as credit cards for product purchases. a student loan, a personal loan, car loan or home mortgage.
Consumer Credit Basics
Consumer credit basics are straightforward. When you receive credit from a creditor, for example from a bank, you are assuming debt. Debt is the other side of credit. You will need to pay back the full amount of this debt, interest and possible late fees depending upon the terms of the credit agreement.
Having access to credit means you can buy something before you pay for it. This ability to borrow gives you the flexibility in planning your purchases and makes it possible to pay for a large purchase over time. However, you also pay interest on the purchase amount, so use credit wisely, and only borrow money to make necessary purchases.[/vc_column_text]
Types Of Credit | View Of Lender
Federal Reserve G.19 Rel - US Consumer Debt 2018
How Is My Credit Worthiness Determined?
Your financial life is defined by the contents in your credit reports that are generated by the national credit bureaus. Whenever you have requested credit from a lender, for whatever reason, that is noted in your credit reports. Each payment or non-payment that you have made to a creditor is recorded in your credit reports. All of these credit activities are retained in your credit reports for a period of seven to ten years before rolling off. In the eyes of a potential lender, your credit report defines you.
The information in your credit reports are numerically analyzed by the credit scoring companies. Based on their financial models they assign you a credit score that is used by a lender as a predictor of consistent, on time repayment of credit debt. The financial models that the credit scoring companies use do not take into consider any personal information of the debtor. In that sense your credit score is completely impersonal. Right or wrong, good or bad, your credit score determines your credit worthiness.
Credit Report | Credit Score
Consumer Credit Basics Review
Americans are living beyond their means. The average American household carries $137,063 in debt, according to the Federal Reserve’s latest numbers. Yet the U.S. Census Bureau reports that the median household income was just $59,039 last year. That means many Americans are living beyond their means.
There are good and bad uses of credit. Consumers primarily have a problem managing their credit card debt. Good use of your credit cards should be for their convenience, ease of use, and relative safety. Bad use of your credit cards is if you are using them to make everyday purchases that you cannot afford to pay in cash. Then you are on the verge of debt trouble.
One of the principal consumer credit basics is that you need to live within your means. Use credit responsibly. Don’t be a debt statistic.