Misconceptions circulate when it comes to talking about credit. Many people tend to believe that it is analogous to money, making it possible to make purchases when your bank account displays small numbers. Although both are similarities, credit is a tool that could either help you out or harm you, depending on the utility or the decisions you make. Credits are loans with interest. It is therefore essential to make payments and meet the deadline so that it is advantageous.
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The word “credit” comes from the past participle of the verb to believe in Latin, “credere”. This means that the creditor is able to believe that the debtor will pay its debt by the due date- Payday Loan Consolidation- Get Out Of Debt – Payday Loan Help. In short, a credit indicates a promise to the creditor from the debtor that the money spent on goods and services will be returned to him.
In the past, markets and fabric manufacturers sometimes worked with credit. Faithful and loyal business customers had the opportunity to buy their property with credits. If they did not meet the deadline or refused to repay their debts, customers could face criminal charges and pay the full bill in one go.
The evolution of this system has led us to the current credit cards – Visa, Mastercard, and American Express – to avoid individual credits within each company. This standardization has led to credit rating, varying from one customer to another according to their commendable characters.
What is the Credit Rating?
Credit rating is a way of valuing a debtor based on their repayment habits. It takes into account his old credits, his salary, the money borrowed and his tendency to repay his bills in the future. It is possible to view your credit rating online with your credit report.
There are two major credit bureaus that carry credit ratings: Equifax and TransUnion. Odds usually range from 300s to mid 800s. They can vary according to the institution that analyzes them.
What factors can affect your credit rating?
There are several factors that can change your credit rating positively or negatively. Not respecting the due date or not making payments are the most influential. Doing so could result in a change in your credit rating and could appear in your next credit report. Other factors that may affect your rating are income-related debts. Also, it will vary if your pay is lower than your debts.
On the other side of the coin, if you are disciplined and vigilant with your expenses and payments, this will show your creditors that you are responsible. Your good credit rating can make you benefit when you apply for a mortgage, a big post or a new car.