The Different Types Of Credit On The Market

According to financial terms credit is when a sum of money is loaned to another party

, called the borrower, and giving time to pay back the loan. They can repay loan back over a previously determined period of time. Good history will not just get us another piece of plastic, it can help get us jobs, mortgages, apartments and cars. Lending can have a huge impact on your future as a lot of places look to our credit to judge our worthiness.

Short term credit is another type, and is usually based on a one time purchase which the borrower pays back over a small period of time. There is usually a small amount of interest although if you are late in paying, you may be charged a late fee. Long term is similar only the terms are over many months and years. Your payment is set at a fixed amount where you have to pay it back over a preset period of time and interest charges are often higher.

Secured credit is the easiest to get but you have to put up something of value, referred to as collateral. This is a guarantee to the lender that they can recover some of the funds if you default. Mortgages and car loans are examples. Unsecured means nothing is asked for as collateral, the company is giving you money based on the trust that you will pay it back. Charge cards are one example.

If you are just starting out and have no real history, there are small ways you can prove you are worthy of lending to and start to build a good history. When you want to go for bigger loans or future lending, getting approved will be more likely. The more good credit, the easier it gets to obtain it.

If you do not already have one, open a savings or checking account. This is the easiest ways to start establishing your borrowing history. Once you have the account open, act financially responsible. Do not bounce checks or put yourself in the minus.

Apartment and home renters already have a sort of lending history. Your landlord can vouch for the fact that you pay the rent on time. Also pay all utilities promptly in case you need proof from utility companies of your ability to pay promptly.

It would not hurt to apply for gas or department store cards. They are easy to get and will give you about five hundred to one thousand dollars to spend. Make your monthly minimum payment on time each and every month or pay the balance entirely. If not, then the company will charge interest on the total amount charged for that month.

With the exception of secured borrowing, the finance or lending company is taking a big chance giving out money to the borrower with nothing to back them up on. Maintaining good borrowing history can open the doors for new opportunities. It is a good idea to hold fast to the set terms of any lending contract.

by: Tamala Parsons-Wilkes

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