Importance of Credit Essay
Have you ever been turned down for a loan or an apartment lease and wondered why? It could be due to your credit history. Let’s face it–our credit says a lot about who we are. It is our financial report card, and can affect many aspects of our lives. Professional credit counselors at ClearPoint Credit Counseling Solutions agree that having a good credit history is imperative to leading a financially fit life.
What is Credit?
Credit is defined as a contractual agreement between a lender and a borrower in which the borrower assumes something of value, and agrees to repay the lender on a future date.
How does it work?
When you apply for credit (say a loan or a credit card), the lender has to decide if you …show more content…
According to financial theory, increased credit risk means that a risk premium must be added to the price at which money is borrowed. Basically, if you have a poor credit score, lenders will not shun you (unless it is utterly awful); instead, they'll lend you money at a higher rate than the one paid by someone with a better credit score. The table below shows how individuals with varying credit scores will pay dramatically different interest rates on similar mortgage amounts - the difference in interest, in turn, has a large impact on the monthly payments (which pay off both interest and principal). As you can see, your credit score can affect your mortgage in many ways:
Read more: The Importance Of Your Credit Rating http://www.investopedia.com/articles/00/091800.asp#ixzz3oNUugy6c
Follow us: Investopedia on Facebook
Why is good credit so important?
By Erin Peterson • Bankrate.com
Today's economy runs on credit. If you want to get a mortgage loan for a house or a student loan to pay for college, or if you just want to put your lunch on a credit card, a company is extending credit to you.
Your creditworthiness is defined by your three-digit credit score and is the key to your financial