Why Is Credit Accessibility Important?
Cash may be king, but credit is crucial to navigating everyday life. It can be a lifeline to owning a home, buying a car, starting or growing a business, getting insurance, and even renting an apartment or car. Whatever your needs, having access to credit is often a necessity. You may not realize how important credit is until access becomes limited.
Types of credit
Credit is an arrangement to borrow money for what you need now, with a promise that you’ll pay it back later. The two major types of credit? Revolving and installment. With revolving, you borrow and reborrow for as long as you continue to pay down your balance (e.g., a home equity line of credit). Installment credit is a fixed sum of money that you borrow upfront and then pay back (with interest) in fixed payments over a set number of months.
Your credit profile
Every time you borrow money from a lender, such as opening a credit card, or taking out a loan for a car, your lender checks your credit report to see your borrowing history. If you’ve made your payments on time in the past, you most likely have developed good credit with a high credit score. If you’ve defaulted on a loan in your past, made late payments or didn’t follow the terms of the agreement, you may have developed bad credit with a low credit score. If you’re considered a risk, lenders will be cautious about lending to you; if they do, it’ll cost you more.
Credit invisible
Finding a lender to approve you for a loan (think mortgage or car loan) can be extremely difficult if you have bad credit or haven’t yet established a credit history. Having a “thin” credit file may impact other goals as well such as renting an apartment, opening utility accounts, buying insurance, and possibly applying for a job.
Building credit
Building credit takes time. That’s why it’s a good idea to start working on your credit before you actually need it. Be intentional about the loans you take out and how you pay them back. Slow and steady wins the race. If you keep your account balances low and pay on time consistently every month, you’ll attain the credit you need to make progress toward your financial goals.
Here are some tips for building your credit so that you can easily access credit, according to Experian, which is one of the three major credit bureaus.
If you’re looking to build your credit through smart financing, Centreville Bank offers a variety of solutions from loans and lines of credit to debit cards and credit cards. Our bankers are here to support you as you make progress toward your goals.
Types of credit
Credit is an arrangement to borrow money for what you need now, with a promise that you’ll pay it back later. The two major types of credit? Revolving and installment. With revolving, you borrow and reborrow for as long as you continue to pay down your balance (e.g., a home equity line of credit). Installment credit is a fixed sum of money that you borrow upfront and then pay back (with interest) in fixed payments over a set number of months.
Your credit profile
Every time you borrow money from a lender, such as opening a credit card, or taking out a loan for a car, your lender checks your credit report to see your borrowing history. If you’ve made your payments on time in the past, you most likely have developed good credit with a high credit score. If you’ve defaulted on a loan in your past, made late payments or didn’t follow the terms of the agreement, you may have developed bad credit with a low credit score. If you’re considered a risk, lenders will be cautious about lending to you; if they do, it’ll cost you more.
Credit invisible
Finding a lender to approve you for a loan (think mortgage or car loan) can be extremely difficult if you have bad credit or haven’t yet established a credit history. Having a “thin” credit file may impact other goals as well such as renting an apartment, opening utility accounts, buying insurance, and possibly applying for a job.
Building credit
Building credit takes time. That’s why it’s a good idea to start working on your credit before you actually need it. Be intentional about the loans you take out and how you pay them back. Slow and steady wins the race. If you keep your account balances low and pay on time consistently every month, you’ll attain the credit you need to make progress toward your financial goals.
Here are some tips for building your credit so that you can easily access credit, according to Experian, which is one of the three major credit bureaus.
- Become an authorized user on a family member’s or friend’s credit card. Be selective with whose credit history you decide to piggyback on. Make sure they have an excellent payment history and they keep the balance low.
- Try using a credit-building debit card.
- Apply for a secured credit card.
- Apply for a store card.
If you’re looking to build your credit through smart financing, Centreville Bank offers a variety of solutions from loans and lines of credit to debit cards and credit cards. Our bankers are here to support you as you make progress toward your goals.