Young Americans Blog

Concept of the Month: Are You Credit Ready?

2014_Bank_Concept_Credit

Each month in Young Americans Bank we focus on one financial concept and talk with all of our customers about it.  This month we’re discussing credit: what it is, how you build it, and how you use it.

What is credit?

So what exactly is credit?  Credit is defined as confidence in a borrower’s ability and intention to repay.  The credit history a person has typically determines how much they will be permitted to borrow – for what purpose, for how long, and at what interest rates.  If you have a good credit history, you’re more likely to pay back any future money you might borrow, which means the bank has high confidence in you.

Why Do We Need Credit?

We use credit to buy goods and services, get loans for cars, houses, school and businesses.  However, credit is good for more than just shopping.  Our credit history not only tells lenders about our borrowing habits, it also tells employers and landlords how responsible we are.  If you have bad credit, an employer might not consider you for a job, or a landlord may not want to rent an apartment to you or your car payments and insurance premiums may get more expensive.

The Easiest Way to Build Good Credit

However, it’s really easy to build up good credit.  How? Pay your bills on time!

Pay all your bills in full and on time every time and you’ll be building a good credit history.  If you have a credit card, be sure you’re not buying more each month than you could actually pay for in cash.  That way you’ll know that you have enough money to cover your monthly credit card bill — and you can pay it in full every time.

Types of Credit Users

There are two types of credit users.

Revolving credit users charge purchases on their cards and then only pay part of the balance when the bill comes.  The next month, they will have the balance of the new charges, the rest of last month’s charges that they didn’t pay, and interest.  This becomes a cycle that revolves around and around, building up more interest, bigger bills and more debt.

Credit cards can be handy tools for people who use their cards for the ease and convenience that they provide, and then pay their entire balance off every month.  They rarely carry over a balance or pay interest on a bill.  This person is called a convenience credit user.

What kind of credit user are you? Come into Young Americans Bank to learn more about how you can build good credit!

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