Without access to affordable credit — your ability to borrow money or receive a bank or government loan — it will be difficult to meet your financial goals and manage your personal finances effectively. Your credit is more than just a piece of plastic in your wallet, conveniently allowing you to purchase goods and services without having to carry large amounts of cash. Good credit allows you to finance college or graduate school, buy a car or home, rent an apartment, or even get insurance and a job.
Your credit use — how consistently you pay back your credit card balances and loans over time — is reflected on your credit report. This report directly formulates your credit score, a key factor in determining how much lenders will charge you for a loan. These concepts are vital to understanding both the cost of credit, and if you can obtain credit at all. Poor credit might mean borrowing from family and friends (possibly straining relationships), or using the high cost informal sector including loan sharks and payday lenders, neither a responsible nor sustainable source of credit.
Irresponsible credit use will cause you to accumulate money owed to your lenders, or debt. Too much debt, if obtained from the wrong source or not paid back on time, can have severe negative consequences to you, your family, and your future. However, there is such a thing as good debt, which can help you build a positive credit history.
Understand the costs and benefits of using credit.
Credit cards offer consumers many advantages. But there also disadvantages. Learn about the costs and benefits of using a credit card.
Learn how to read a credit report, who accesses this information, and how to prevent errors.
Learn how your FICO score affects your ability to borrow money and what steps you can take to improve your score.
Debt is money you borrow from a financial institution that usually must be paid back with interest. Learn the difference between good and bad debt and what you can do to protect or repair your credit.
Bankruptcy is a legal proceeding in which a person who cannot pay their bills can get a fresh financial start. Learn how bankruptcy works and how it affects your life.