Friday, December 21, 2012

Purpose of Credit and Getting Credits

Forms of Credit and their Purpose

Credits may serve two purposes in respectively two different contexts. 

One is commercial credit, which is that part of the purchase agreement made by companies. This is whereby companies approve of their customers to processes deferred or delayed payments of resources. This can be made at a personal or commercial level for consumer credit.

To manage your credit records, companies would often employ a credit manager who keeps them informed of financially unstable customers. This credit manager is one who also notifies whether or not you can be granted the right to borrow money from the financial institution.

Another one is consumer credit. Consumer credit is credit that is obtained by offering goods or services in exchange for payment to be settled at a later date. Examples common are credit cards, loans, mortgages. The latter two consist of having to pay for surcharges and interests as part of the credit due or borrowed amount.

Sometimes also, you would need to arrange for an insurance plan for the credit. Frequently, this is being practiced for car loans, house loans and business investment loans. Excluding non-obligatory charges, legal parties would mandate you to cite and specify the charges in percentage form. This is to give you a more accurate estimate amount of reimbursement of the debt.

Credit Information: Credit Report, Score and Risk

There are many terms and arrangements associated with credit. The common denominator is that everything needs a credit provider to subscribe to, a written contract and your good credit standing as a debtor.

How do you actually get accepted by the creditor to borrow money? There are so many people who would want to get a loan to fulfill their dreams of acquiring material things. However, not all are approved.

Check Your Credit Report

In order for the lending authorities to determine if you can be a good payer, they examine your credit report which includes your credit score and standing.

In the credit report, all payments you have done in the past are shown. The credit report keeps track of the history of your credits borrowed as well. It states if you have been bankrupt, how you paid thus and if there are delays in your payment.

These information are forwarded by banks, stories and credit card companies to a credit bureau, which is the overall body that maintains credit records. Because of the auditing, they need to provide accurate information on behalf of their customers.

The credit bureau then verifies their submitted customer information for approval. If all info are checked and audited as correct as matching the profile of the customer, this then signals a sanction for the credit.

Get Your Credit Report Score

One part of the credit records is the credit score. This score authenticates your creditworthiness and is taken from the statistical analysis of your credit history. This is checked thoroughly by the credit bureau to ensure that there won't be any loss of money (e.g. non repayment of credit).

Credit Risk

Notice that they have a thick bunch of information for checking. So on your part, you must do your homework as well. As the debtor, you must be critical in choosing the institution or company to seek for credit application. This body must also have an outstanding reputation; else, your name may be damaged and put at negative stake.