Learning Everything About Credit-Part 1-How Important is Credit and Different Types of Credit

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This is part one of three series of "Learning Everything About Credit-How Important is Credit and Different Types of Credit."

We see these commercials on how to obtain your credit score for free, as in Credit Karma. In these thirty-second clips, they are making it like it is fun to get that score; in reality, it it a very important part in knowing about your credit history.

How important is credit?

When we think of credit, we automatically think about credit cards, credit reports, and credit score. That is part of it. It is very essential to settle with a good credit history basically by making your payments on a timely basis. Your credit worthiness will determine whether you are able to borrow money or buy different products and/or services on credit. In addition, it will have an impact on the following:

• Employment: Depending on which job that you are trying to pursue (especially if you are getting a job that will involve cash handling), there are some employers that will ask for a credit report. Having bad credit may prevent you from obtaining a job.
• Living accommodations: What this means that landlords are looking for people who will pay their rent on time. Often, they will acquire a credit report to determine whether they will rent an apartment unit to you.
• Finance rate: The better your credit is, the lower your rates are. Anyone with a good credit history are usually offered lower financial rates than those people that have a terrible credit history.
• Overall convenience: Convenience is everything to us, especially if we have the luxury and freedom to do that. For example, making hotel reservations and shopping online is very convenient if you have a credit card. However, credit cards may be difficult to get if your credit is a mess. It is not impossible to get a credit card, but it is not as easy.

While we are on the subject of the importance of credit, it is also good to know about the different credit types--in fact, there are three: short-term, installment, and revolving.

• Short-term credit: This type of credit is usually paid back within less than a year. Good example of short-term credit is a payday loan.
• Installment credit: With installment credit, you made the agreement with the creditor to pay back in monthly installments on a regular basis.
• Revolving credit: This is credit that is available in terms of having a pre-determined credit limit as long as payments are made regularly and on time. The classic example of this type of credit is our good and fairweather friend, the credit card.

Learning about credit is very essential if you want to have a healthy financial future. Being smart about credit will determine anything from getting that dream house (apartment, condo, townhouse, etc.) and/or getting that dream job. The bottom line: be wise about credit.

Until then, I will talk to you later. Happy Saving!

Next post: Learning Everything About Credit-Part 2-Credit Cards and Credit Reports