When it comes to credit, knowledge is power. That’s why in addition to helping people repair theirs, the team at Jubilee Credit Freedom also strives to educate our clients on the basics of credit so they can be more empowered and less likely to experience problems in the future. If you’re just beginning your credit repair journey, this page is a great place to start so you’ll better understand the process.
Credit Explained – McKinney, TX
How Credit Works
What is Credit?
The concept of credit has been around for as long as people have exchanged currency for goods and services. Essentially, it is borrowed money that can be used to buy whatever you want, whether it is something as simple as a meal or as big as a house. An individual receives credit from a credit grantor, and the individual agrees to pay back any amount they have spent using that credit in addition to any applicable fees.
The Different Types of Credit
- Revolving Credit: You’re given a maximum credit limit, and you can accrue charges up to but not exceeding that limit. Every month, you carry a balance (“revolve the debt”) and make a payment. If this sounds familiar, that’s because most credit cards are a form of revolving credit.
- Charge Cards: Charge cards differ from credit cards only in that you must pay the total balance every month.
- Service Credit: If you have an internet provider, cellphone carrier, gym membership, etc., these are all examples of service credit. You receive a service and agree to pay for it each month.
- Installment Credit: A creditor loans you a specific amount of money, and you agree to make payments towards that amount with interest over time. Car loans and mortgages are common examples of installment credit.
Why You Need Credit
While it’s relatively simple to stick to cash for small purchases when it comes to buying something like a car or a home, credit is absolutely essential for most people. Of course, credit can also extend beyond buying things, as many employers and landlords look at people’s credit scores before hiring or allowing them to move in.
Credit is especially important if someone is applying for a loan, whether they are trying to make a major purchase, start a business, go back to school, etc. Lenders look at the credit score to help them answer a basic question: “Will this person pay me back?” If they see a less than desirable score, someone can easily be denied the loan, which can have a huge impact on their life.
If you’re experiencing these kinds of problems due to bad credit, the team at Jubilee Credit Freedom is ready to help. To get a FREE personalized credit consultation so we can show you how we can get your score back on track, contact us today.