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Credit is what you use to buy
products or services today and pay for them at a later
date. Some common examples of credit are auto loans, credit
cards, and mortgages. When an individual applies for a
line of credit or loan, the creditor or lender determines
how much the individual will be permitted to borrow, for
how long, and at what interest rates. Credit can also
be determined by such items as rent payments, utility
payments, insurance payments and any other items that
can show that you are able to make payments on time.
The creditor or lender takes
a close look at your credit history to determine whether
to risk lending you money. Factors that contribute to
your credit include your debt to income ratio, financial
reliability, and records of previous credit transactions.
When you have a good credit history, lenders are more
willing to issue credit cards, lend money, and provide
more favorable terms and rates.
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