How credit affects personal finance

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The majority of people in the United States will use credit at some point (or many times) in their lifetime. Most people buy their cars using credit, make monthly purchases using credit, and buy their house using credit. Sometimes credit is thought of as a negative thing since it can easily affect someone adversely. But credit can also be a very good thing, helping to get people in to their dream house or afford a months worth of groceries or gas.

Loans

Many people have car loans and a mortgage loan. These loans are considered essential for most people so that they have a place to live and a way to get to their job etc. Loans are a line of credit. Loans can help people afford things, like a house and a car, which they wouldn't be able to afford otherwise. Loans are a part of most people's personal finances. Paying off loans on time can help people get better lines of credit in the future.

Having a credit card

Having a credit card can be a very good idea. If a person is responsible and smart about their credit card usage, having a credit card can help a person with their personal finance. Maybe there is a month when the car breaks down and the person doesn't quite have enough money to fix the car. If they have a credit card they can use it to pay for the repair that they wouldn't have been able to afford otherwise. When making purchases online, it is safer to use a credit card than it is to use a debit card. So having a credit card can also keep a person's money safe from crooks.

When a person uses a credit card responsibly it can build up there credit history thus improving their credit score. Improving a credit score is very helpful for people. Having a better credit score can allow people to get more lines of credit. If a person wants to improve their credit score it will require them to purchase items with their credit card and pay off the credit card promptly. A person should keep the balance of the credit card as low as possible and try never to exceed their credit limit.

A credit score

A person's credit score can affect them more than anything when they are applying for or making big purchases. A credit score can range from 350 to 850 (which is an excellent credit score.) A bad credit score is between 350 and 580. With a score of 580 to 630 being considered poor and a credit score of 630 to 650 being fair. A good credit score is 650 to 720. The range of an excellent credit score is 720-850. The average credit score tends to be around 720.

A person's credit score has to power to affect what interest rate they will be able to get when they are applying for a car loan, a mortgage loan, or even a credit card. It is even possible that a person's credit score could stop them from getting any kind of loan at all. The lender needs to have some kind of assurance that the person asking for the money will pay it back, and pay it back on time. A good credit score is what can help the bank or credit union feel somewhat secure that they will get their money back. If someone has a bad credit score essentially it is telling the lender that the person may not be very responsible about this loan; they may not pay it back in time or at all. A bad credit score says quite a few negative things about a person.

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