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CREDIT OVERVIEW

 Only a few of us are able to pay cash for necessary items of daily living; the vast majority must use consumer credit in order to acquire the items which we desire and need.  We buy the things now and pay for them over time in the future.  Very few people don't use at least one kind of credit. Credit lines such as a mortgage for your home, or a loan on the equity you have on your home, a credit card or perhaps a payment plan for a major appliance in your home.  Vehicle insurance policies are often paid in installments, as are department store revolving charge accounts.   

 If you are using, or have used credit in the past, you certainly know something about the process, but do you understand such things as your credit rights, how you insure the rights you have under your credit line, and where you can go for assistance if you have a credit related problem?

Even if your credit practices haven't gotten off to a good start, you can still avoid danger points, and know how and with whom you can get assistance if you should get into trouble in your credit usage.

Before a creditor will grant you any type of credit, whether it is a loan, a credit card of a mortgage, the lender will want to be assured that you are a good credit risk.  The creditor wants to know if you are worthy of being granted credit.  In other words, are you able to repay the monies and just as importantly, are you willing to repay.  In order to assess your creditworthiness, the credit will often look at factors such as your capacity to repay, your capital and your character.

CAPACITY TO REPAY

Your capacity is your ability, both in the present and in the foreseeable future to handle the financial responsibilities which you have or will incur.  Is your employment steady or secure?  How long have you been in your present position, and how large is the debt load you already carry?

CAPITAL

Your capital is your assets such as cash, savings and other--usually fairly accessible--assets such as money market accounts which could be used as security or collateral for your loans.  This doesn't mean that you are always required to put up security for the loans which you acquire, just that many potential lenders would like to know that you could access assets other than job income if necessary in order to repay the loan which they grant to you.

CHARACTER

The first two factors reflect your ability to repay.  The character element is the lender's attempt do determine your willingness to pay.  The lender looks at your history in order to determine whether you have made a practice of paying other bills on time, including rent, utility or mortgage payments.  A good credit history will give you a better chance to acquire the current loan, especially if you appear to have a willingness to pay.