Americans today carry more debt than ever before. And credit reports and ratings are becoming more and more important in determining what you can and cannot buy. Chances are, even if you haven't checked your credit report in years, you probably know if you've racked up too much debt. If that's the case, check out Everyone's Money Book on Credit by Jordan Goodman, and learn how to manage and reduce your debt.
Credit provides the ability to buy something now, when you lack cash, and pay for it later. Whether you purchase a small toy or a large house, the principle remains the same. For the convenience of obtaining the item on credit, you must pay a fee called interest. Think of interest as rent on money you borrow from a lender, whether that is a bank, credit union, savings and loan, or retail store. When you have the cash to pay off the loan, either in a lump sum or over an extended period of time, you can stop paying "rent" (until you borrow again).
The ability to buy something with an instant loan is a double-edged sword. On the one hand, it is a privilege to take home something of value without having the cash to pay for it. On the other hand, it creates an obligation to pay the debt. The longer you take to pay off the loan, the more it will cost you in interest. Because it is so tempting to say "charge it" and to worry about the bills later, proper use of credit requires more self-discipline than do many other areas of personal finance. In general, you should borrow when you must finance the purchase of something that will grow in value over time, such as a house or a college education. The worst things to finance include items that are consumed quickly—such as food or vacations—and worst of all, other debts.
Credit has become so ingrained in the American consumer’s psyche that it is hard to imagine our lives without it. For example, you would find it difficult to check into a hotel, rent a car, or buy an airline ticket without a credit card. You probably could not afford a home without taking on a mortgage. And you might never make it through the Christmas season without charging your purchases on your retail store accounts and paying for the gifts over the next several months. Yet many people who have abused their borrowing privileges find themselves cut off from the normal world of commerce because they no longer qualify for credit.
Resist thinking of your credit as simply a tool that can help you make purchases or prohibit you from making them. Whether you know it or not, your credit is an accepted gauge of your financial stability—and credibility in general—not only among home equity lenders, mortgage lenders, and additional credit providers, but also those who don’t directly grant you a line of credit—such as your employer, potential landlord, or insurer. While your credit history cannot legally be held against you by a potential employer, it can color how your employer views your stability as an employee. And landlords reviewing potential tenants for their rental properties will often let a healthy credit report cast the deciding vote. Insurance companies can set your premium based on your credit rating. Demonstrating that you have the ability to meet your financial obligations on time—all the time—can help you make the most of your personal and professional life.
Everyone’s Money Book on Credit will help you understand not only the implications of having good—or bad—credit, it will help you maximize the benefits your good credit can bring. Or, if you’ve approached—or crossed—the danger line of poor credit, it will help you start on the road to rebuilding it. This book gives you access to the same information about you that your lenders do. Learn all you can about your credit and how to make the most of it.
Everyone’s Money Book on Credit would not have been possible without the hard work of finance writer Andrea Bennett, who expertly pulled together the threads of this book into a wonderful and comprehensive resource on everything you need to know about credit.
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