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Understanding Credit

Understanding credit is the basis of normal living in our consumer-driven society. We use credit cards to buy just about everything, we mortgage our houses, we secure bank loans, and we get our cars on hire purchase. These are all types of credit, and someday they all have to be paid off too.

There was a time when people simply went without if they didn't have the money they needed to buy a particular item. They may have had a friendly neighborhood shopkeeper who would let them get a little bit of credit when times were harder than usual, but by and large they lived without credit of any kind.

In fact, older generations had the kind of ethics that made them feel that if they couldn't afford it they simply would do without it. Debt was seen as a very bad thing indeed. People were thrown into jail for having bad debts. Their way was to pay for what they needed every time.

Today we have credit as part of our lives. That's why understanding credit is important. Credit is a double edged sword in many ways. It can make life a whole lot easier if managed properly, but it can ruin lives too if it isn't. Debt is debt, and getting credit you can't pay back is one sure way to land deep in debt.

To get credit you need to have a good credit history. This is the major reason why you should always pay at least the minimum amount on any credit owed every month. You also need to always pay it on time too. Missing payment dates goes against you on your credit score, making it harder to get credit next time you need it.

If you have a very good credit score you will find that getting credit is easier than falling off a log. Establishments of all kinds will try to give you as much credit as you can handle and more. You are a good risk in this position and people trust you. Your past history of managing borrowed money is excellent and the lenders feel good about taking a risk with you.

If you have a poor credit score you will struggle to even find the price of a cup of coffee in credit. You will find yourself asking establishment after establishment for credit only to be refused. You will work yourself down from the respectable establishments to the not so respectable ones. If you do find a place that will give you credit, expect to pay heavily for it in interest charges. This is not the kind of situation that anyone would like to be in.

When you accept anything on credit and start to repay, you start to create your credit history. The better you manage things the better your credit report will become. Other things affect your credit. The older you are the better trusted you are likely to be. Being married is viewed as being good, and a steady employment history works wonders too. Understanding credit is really about the little things that all add up to become one big thing – your all important credit score.

Credit in Minutes Tip #1

Stay on top of your credit report. Most credit reports contain errors. Make sure you check your credit report every year (you get one free credit report every twelve months) and if there are errors make sure to challenge them with the reporting credit agency. Credit agencies are required to investigate each and every challenge that gets reported.

Credit in Minutes Tip #2

Just because you qualify for all of those credit cards does not mean you should get them. A person with too many credit cards looks sketchy in the eyes of a potential creditor. Think of it this way: if a person is financially stable does he or she need ten different credit cards? Wouldn’t just one or two suffice?

Credit in Minutes Tip #3

The best way to raise your credit score is to make all of your payments on time. It sounds too simple to be true, but that’s all there really is to it. Staying out of debt and/or making all of your debt payments on time will keep your score up where it should be.

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