Many times we get those credit card offers either in our mailboxes or in our email inbox (usually in the spam folder). Those beautiful credit card designs (who can resist)--that' s what draws many of us to get a credit card--and get into major credit card debt! Ok, let us get to the nitty gritty of the credit cards.
Of course, you know what credit cards are--those plastic 2.5 x 3 cards that are given to us by a financial institution which permits us to make a purchase in case we do not have cash on us at the moment. The question is how do we know which credit card is right for us?
Just think about whenever you get a credit card, think about these few categories that make up a credit card and of course, these are the areas that many people fail to pay attention:
- Annual Percentage Rate, or APR: This is the yearly rate of credit.
- Periodic Rate: In the case of a periodic rate, this is the interest rate that is utilized to come up with the financial charge on your balance.
- Annual Fee: This is the amount in which you are paying to the cardholder. Think about it like a membership fee.
- Grace Period: Grace period is basically the number of days that are given for you to pay your bill prior to the financial charges begin to pile up. Grace period is usually around 22 to 30 days.
- Financial Charges: This is where many people go into credit card debt. Financial charges are calculated by using an average daily account balance. You want to seek offers that has an adjustable balance in which it subtracts your payment from your balance.
- Other Fees: Many credit cards charge you a particular fee either when you get a cash advance, making a late payment, or an overdraft on your credit limit.
Credit cards are convenient and very nice to have, but just like cold hard cash, if you are spending carelessly, then you will end up in a financial hole--this is where the credit card debts are made.
Next, the credit report...
What does Experian, Transunion, and Equifax have in common? They are all credit reporting bureaus, or agencies (whatever you want to call it). These are where your credit report is assembled.
What is a credit report?
A credit report is referred to as a document which includes information concerning you and your payment history. As I mentioned earlier, it is assembled by a credit reporting agency. It is available to anyone that wants to give you credit, as in issuing a credit card, a car loan, or a mortgage, just to name a few.
What is exactly included in your credit report? The following is in your credit report:
- Personal identification number
- Employment information
- Adverse/collection account information
- Credit card information
- Inquiry information
The following is not allowed in your credit report:
- Race
- Religious affiliation
- Medical history
- Personal lifestyle
- Criminal record
- Checking/Savings account information
When many people think about credit report, they are often thinking about their credit score (Credit Karma, anyone). Credit score is usually separate from your credit report. It is a number that corresponds to the information provided on your credit report. This score is based upon your credit report history and is a tool for creditors to determine how likely it is that you will repay a loan and make payments on a timely basis.
Included with the credit score is credit rating. Credit rating--it is actually self-explanatory--the higher your credit score, it is likely that you are a better credit risk. As a result, if you have a higher credit score (think about the FICO score, which ranges from 350 to 850, with 850 being the higher score), you are more likely to receive a loan or a credit with a lower interest rate than those with a lower credit score.
I can give you a couple of tips regarding the credit report--these are from my own personal experience with my credit reports--and it helps! Anyway, here are my tips:
- Request a copy of your credit report every year. This is free, or
- Request a copy of your credit report whenever you desire--you are paying a fee for this, usually $10.
As I said earlier regarding credit cards, if you are spending carelessly with a credit card, then you are more likely to have some credit card debt. Be smart with your credit cards. In terms of credit reports, you should obtain one at least once a year to check for discrepancies. When you do these two things, you will feel much better about your credit.
Next post: Learning Everything About Credit-Part 3-Things to Do When You Have Bad Credit
Until then, I will talk to you later. Happy Saving!
No comments:
Post a Comment