This is an informative article to introduce you to the meaning of the word “credit”. What is credit and what types of credits are there?
In simple words, when you pay the credit you are actually borrowing the money needed to make a purchase.
Some ways in which you use credit:
1. You are using credit when you make a payment at a store with your card or you charge your card at a retailer store and you pay your credit card or charge the card bill later.
2. You are using credit when you borrow money to buy a new home a new car or a new apartment and pay back the whole amount plus the amount calculated by the interest rate.
3. You are using credit when you take a personal loan to clear debt.
There are a few types of credit involved in these situations such as:
Revolving Credit: This is a type of credit where you are not required to pay the bill in full amount each month. A revolving account enables you to revolve the spending that you make from month to month. You are charged for the money you borrowed to make purchases and didn’t pay back in full, plus finance charges for rolling over the debt from month to month. Most credit cards are revolving credit cards accounts and you are given a limit for your spending.
Charge Cards: Charge cards are similar to credit cards. A charge card is a card which allows you to make a purchase at a retailer or at a store while paying back the amount to your lender or your creditor. The difference is that you are required to pay back the full amount each month.
Installment Loans: These loans have a fixed number of payments over a fixed number of months With this type of loan you agree to borrow an amount of money from a lender and agree to pay back the loan in full with interest rate included over a series of monthly payments.
It’s important to have different types of credit on your credit reports to show your creditors that you can handle those credits. If you have more questions please make sure to opt-in on your web-form or call us and we will be happy to resolve any question you might have.