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Understanding The Function Of Credit
By: Sheldon Smith
What is Credit?
Credit is the backbone and the engine behind the workings of the economy. Credit
simply allows individuals and companies to borrow funds in good faith and pay it
back over a specified time frame. Lenders base their decisions on who they
should lend to by using your credit rating.
Your credit rating is a numerical score that is based on your payment history.
From your credit cards and loans right down to your phone bill, you will find a
recording of each payment. It reports whether you pay your bills on time or if
you are constantly late. And if you are frequently late, it records the amount
of time taken to make that particular payment. Your credit report is pulled
(viewed) every time you apply for a loan, credit card and even to have a phone
line installed.
Good Credit vs. Bad Credit
How important is it to have clean or good credit? It's very important because
the worse off your credit is the harder it will be for you to secure a loan of
any sort. It is important to keep on top of your credit finances and make sure
that every payment is made on time and always make sure that you pay at least
the minimum amount but always try and pay more if you can.
If you currently have bad credit, you shouldn't worry too much as there are ways
to still secure a loan such as having a cosigner. If you choose to go this
route, remember that you are both responsible for the loan as it will be taken
out in your names. Also, there are many institutions that work with people with
bad credit and they will assist you with the repair of your credit file. Here’s
a list of a few companies to assist you:
CreditAxis.com, DebtAdvocates.cc, Lexington Law Firm and more. Simply go to your
favourite search engine and type in “Credit Repair” and see how many companies
show up in your search.
Warning: Be wary of those companies that promise to repair your credit promptly
– ie “3 months or less”. Credit repair takes time, so do your homework before
you commit to one company to assist you.
Your Credit File
If you have bad credit, the first step to repairing it is to pay off all of your
bad debts. This is debt that is overdue and not up to date. You may not know
this, but this information may stay on your file for up to 7 years. To assist
you in this, I suggest that you get a copy of your credit report from one of the
credit reporting agencies such as Equifax. Look it over thoroughly because you
may find some mistakes which can be easily corrected with either a simple phone
call or with supporting documentation.
About the Author:
Sheldon C. Smith is a mortgage broker and the webmaster for http://www.sheldoncsmith.com,
a site dedicated to keeping the public informed and educated about the mortgage
and credit process.
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