Understanding Credit Risks and Benefits

In : Business By About :-5 years ago

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Credit is a legally binding understanding in which a borrower gets something of significant worth now and agrees to repay the bank in a decided time interval with interest.

Credit Score

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Everything depends on your credit score, as establishing a good credit score will help you save money and make your financial life much easier to deal with.

What is Credit score?

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A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the credit capability of an individual which falls in the range of 300-900, 900 being the highest. Lenders, such as banks and credit card companies, use credit score to determine who qualifies for a loan, at what interest rate, and what credit limits.

Benefits of Good Credit Score ( Above 700 )

• Less demanding Approval for Rental Houses and Apartments
• Additional Negotiating Power
• Get Approved for Higher Credit Limits
• Better Car Insurance Rates
• Low Interest Rates on Credit Cards and Loans
• No Security Deposits on Utilities
• Better Chance for Credit Card and Loan Approval

Before Going For a Credit, You Need to Understand Good and Bad Credit

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Good Credit

• Staying within your credit limit
• Paying on time
• Never missing a payment
• Paying at least the minimum required payment

Bad Credit

• Going over your credit limit
• Paying too little
• Paying too late
• Missing payments

So, for your better financial life, we'd suggest you to maintain a good credit personality of yours.

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Types of Credit

• Car Loans
• Mortgages
• Signature Loans
• Lines of Credit

Note: When suppliers give products or services to an individual but don't require payment until later, that's also a type of credit.

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Other benefits of Credit

• You may save money while taking advantages of sales.
• You can buy more than you can afford.
• It can help you in emergency situations, such as unemployment, illness, death, or property loss.
• You can make purchases through the mail, telephone, and Internet.
• You can buy things that are needed now when you don’t have enough money to pay for them.
• No need to carry a lot of cash with you.

Credit is a good thing until it's used wisely, but when you try messing with it, it may ruin your financial life and your standard of living. Please share the post if you liked it.

Scroll Down For More: What Is Mortgage And How Does It Work?