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Habits to establishing healthy
credit begin early. Things like keeping a stable job, paying
bills on time, and making smart financial decisions when
you're young establish lifelong pattern of responsibility.
To monitor your financial reliability, credit bureaus
maintain credit reports, which record your history of
repaying loans and debt. A poor credit rating can affect
your ability to borrow money for years to come.
When creditors decide whether or not to lend you money, they
look at three Cs:
-
Character: The
responsible handling of past debt as well as stability
in a job and residence.
-
Capacity: The ability
to repay based on income and current debt. The lender
wants to know current income, current debts, and net
worth (the difference between everything you owe and
everything you own).
-
Collateral: The
property or other valuables used as security to
guarantee the repayment of the loan. Lenders want to be
sure you have something of value that could be sold in
case you default on the loan.
Ways to maintain healthy
credit include establishing a stable checking or savings
account, taking out a small starter loan and paying it off
on time, and making timely payments on everything you owe. |
