• Joshua Stubbolo

Credit: What is it and why do you need to know about it?

What is credit? This is a very common question among large portions of our country. It is a confusing topic that leave many feeling with more questions than answers. This blog post will try to address some common questions and misconceptions about credit.

To start, when we purchase a credit card, we are not actually using our own money. Whoever we use (Discover/Visa/Mastercard, etc.), the companies are lending us the money to make a purchase. This is opposed to debit cards that pulls directly from money we have, whether that be in a checking account or savings account. These differ where with a debit card, you don’t have to pay back at the end of the month, but with a credit card, it is expected to be paid back.

How do you build and use credit? We get credit scores based on our ability to pay on time, the amount of credit that is available to us, how long we have had credit cards, and the type of credit. All of these are combined to give us a credit score, which is used by financial companies when we try to get loans. These scores become vital in gaining access to loans, such as personal loans, mortgages, car loans, and basically any loan you can think of. Can you get loans with bad credit? Well yes, but you would likely get either outright denied for loans OR will qualify for loans with high interest rates and you will likely have to put up collateral for the instance you can’t pay back the loan. It pays to have good credit quite literally.

How should I approach credit? Don’t get into credit debt, only buy on credit what you can pay off. This will let you build up your credit over time by paying off what you have in checking/savings. This will pay off down the road when it is time to take out a mortgage on a house, get a car loan, or even take out a business loan. It is important to understand how we can all use credit to our advantage, however it is imperative to stay disciplined throughout the process.

All in all, credit is a very complicated topic. It has a lot of ins and outs. Deciding what is best for you and your family may seem difficult, but you can easily manage this trying topic by doing your research or even reaching out to someone for help. It's okay to ask for help!

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