Understanding Credit and Your Credit Score
This month, we’d like to break down a few areas when it comes to credit. Credit is money you borrow to pay for things and is a reflection of the borrower, providing a snapshot of one’s payment history, in addition to:
· The types of credit you have
· Judgments, garnishments or liens
· Charge-offs, slow pays or collections
· Delinquent federal debt
Credit is important because it can be used for convenience, large purchases and in emergency situations. Believe it or not, credit also has an impact when it comes to employment, housing and insurance, too!
With credit, there are two costs involved: fees and interest. Fee examples could include an annual fee for a credit card or a fee if your payment is considered late because it was not received by the due date. Interest is the amount of money a financial institution charges for letting you use its money. The interest rate can be fixed (rate stays the same for the life of the loan) or variable (rate changes during the term of the loan).
Lenders need to understand how much of a credit risk you will be before credit is extended to you. This is done by the use of a credit score. This score is calculated based on information in your credit report and the scores range from 300 to 900. A credit score takes into account your past payment history, outstanding debt, how long you’ve had credit, any new applications for credit and the types of credit you carry.
If you’re down a path where you need to repair your credit, here are several tips to get you started toward credit restoration:
· Fix any errors
· Catch up on missed payments
· Make sure all your debts are paid on time
· You need credit in general to have “good credit” - obtain a secured credit card
· After several months of timely payments on a secured credit card, switch to an unsecured credit card
· Protect your credit from identity theft
· Get a copy of your credit report annually
· Pay down credit cards – and avoid closing them
· Don’t apply for multiple credit cards at the same time
Dollar Bank is a proud partner of DCR and is committed to supporting the organization in its efforts to build a well-connected community of residents in downtown Cleveland. Stop by either of our convenient downtown Cleveland Dollar Bank offices (Galleria and Public Square) to speak with our banking representatives so they may answer any further questions for you!
The information presented is general in nature and is for information purposes only. It is not intended to provide specific legal, tax or other advice to individuals.