Did you know… ?

Suppose when you are 22, you charge $1,000 worth of clothes and CDs on a credit card with a 19% interest rate. If you pay $20 every month, you’ll be over 30 by the time you pay off the debt. You will have paid an extra $1,000 in interest as well.

Being on your own can be fun and exciting, but it also means taking on new financial responsibilities. The decisions you make now about how you manage your finances and borrow money will affect you in the future.

 What is Credit?

Credit is more than just a plastic card with your name on it. It’s also your financial trustworthiness. Did you know that there are companies that keep track of whether or not you pay your debts and if you make payments on time? These companies, called credit bureaus, make this information available to potential lenders in the form of credit reports and credit scores.

What is Good Credit?

Good credit means that your history of payments, employment, and salary make you a good candidate for a loan and creditors - those who lend you the money – will be more willing to work with you. Credit worthiness varies from financial institution and usually is based on more factors than just your credit score. Having good credit often translates into lower payments and lower interest rates.

What is Bad Credit?

Bad credit typically results from making payments late or borrowing too much money, and it might lead to difficulty getting a car loan, a credit card, a place to live, and a job. The information on your credit report now could remain there for up to seven years, so poor financial choices now could affect your future creditworthiness.

What Do Creditors Look For?

Most creditors use credit scoring to evaluate your credit record. This involves using your credit application to get information about you such as your annual income, outstanding debt, bill-paying history, and the number and types of accounts you have and how long you have had them. Potential lenders often use your credit score, provided by a credit bureau, to help predict whether you are a good risk to repay a loan and make payments on time.

How do I establish Good Credit?

Many people just starting out have no credit history and may find it tough to get a loan or credit card, but establishing a good credit history is not as difficult as it seems. Besides always paying your bills on time, the following are a few helpful tips for establishing good credit:

• Start out small. Local stores and businesses are generally more willing to extend credit to someone with no credit history. Once you’ve established a pattern of making your payments on time, major credit card issuers might be more willing to extend credit to you.
• Secured credit cards are another option. Secured cards require that you put money in an account first and then lets you borrow between 50 to 100 percent of the account balance.
• You could have someone with established credit co-sign with you on an account. By co-signing, the other person is agreeing to pay back the loan if you don’t.

How do I get a copy of my credit report?

A recent amendment to the federal Fair Credit Reporting Act requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. First Source Federal Credit Union also offers free copies of credit reports and suggestions on how to save money on your loans to Members of the Credit Union. For more information about First Source’s FREE Be Credit Smart program, please call 315.735.8571 or visit www.fsource.org for details.

Sources:

>www.ftc.gov
>www.cusucceed.net