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In this day and age, it is very important to know how credit works. Credit is very important because it affects not only what you want now, but also what you can have in the future. Your credit also affects things that you probably did not even realize. Did you know that it can possibly affect whether or not you get hired for a job? It's true and believe it or not it can affect what you pay for car insurance, house insurance and sometimes even health insurance, and of course, getting a mortgage. This is why it is so important to keep good credit ratings instead of bad credit ratings.
You get bad credit ratings by having missed payments on things such as loans, mortgages, and credit cards.
Most people are in the 60% sub-prime sector with a less-than-perfect credit score. The way your credit rating is scored varies greatly when you are in this group. If you miss a payment on your mortgage, you may drop 20 points on your credit score. If you miss a payment on your credit cards, you may lose more.
People who have excellent credit are in the "prime sector". They are 40 % of the population. If you were in the prime sector, you may not drop any points whatsoever. That might not sound fair, but it's true. One more thing, there is no way to know exactly how many points you will drop for missing payments. It is completely unpredictable, and you never know exactly what is happening.
When dealing with credit, you should never have more debt than a quarter of what you earn per year, other than a mortgage or business loan.
Building up credit is very important. Whether you are building new credit or have extremely bad credit and need to build it back up.
Now, answer this question. If you have no credit and manage to get a credit card, do you think it is better to pay the balance off every month or make payments? If you answered, make payments, you are correct. Think about it: If you pay off the balance every month, you are not really borrowing any money; therefore, you do not have any score on your credit rating. If you pay the balance off in installments, you are building up your good credit rating, as long as you make the payments on time.
It is important to keep track of your credit rating. To do this is easy. You need to get a copy of your credit report. There are three reporting agencies in the USA. You need to get a report from each to compare. Thanks to a law declaring that each person is entitled to one free copy of their credit report per year from each agency, obtaining your credit reports is a simple and easy process.
You can:
1. Go to http://www.annualcreditreport.com and automatically order all three reports for free.
2. Call (877)322-8228 to order your reports.
3. Obtain the Annual Credit Report Request brochure by mail. There is a form on the back you can fill out to request your reports. Once you've done that, mail it to: Annual Credit Report Service, P.O. Box 105281, Atlanta, GA 30348-5281
Make sure you get these reports each year to help keep track of your very valuable credit score. Keep your score up, make your payments on time, and use your credit wisely.
KimberlyAnn
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