What Is The Purpose of Credit?
It is important that you take action right now—right where
you are—if your credit needs improving!
Your situation will never be ideal—as far as a “starting point” to do whatever you desire that is really meaningful and significant!
Many consumers over the years have asked—just why do I need
good credit at this time and what is the purpose of credit?
You must understand that unless you can purchase all that you need and desire with cash, the use of credit will likely have to be a part of your life.
You will in almost all cases have to use credit for a temporary time during your life or
in some cases on a permanent basis (unless you plan your credit and financial future properly)!
Your credit file is used by a number of entities to
determine your dependability or worthiness to repay outstanding debt that you had in the past, you
now have or that you may have in your future.
In the paragraphs that follow we will discuss why the effective utilization and management of your credit will benefit you and your family as you strive to reach your financial goals and objectives during the various stages in your life!
Unless you have a plan in place to purchase your car with
cash or other creative ways—you will have to obtain an “auto loan” and the use
of credit will be required.
Your credit score will be used to see if you qualify for a loan or if you qualify for a loan at a good (or the best) rate. Whether you were to use a dealer, a private seller where financing is needed or a credit union—your credit file and credit score will play a large role in determining the interest that you will pay!
Many car lenders will not even accept your application unless your credit score is 640 or above. Those who do will usually charge you a higher interest rate—and tack on other charges.
Still others will want anywhere from 4 to 7 personal or business references! Why bring others into your personal finances when you can choose to manage your credit effectively—and not have too!
If you apply for a credit card you must realize that credit
card issuer’s will pull your credit file and credit score to determine your
credit worthiness and how much credit to make available to you—or to decide if they will even want to grant you credit at any
If you are unable to get a credit card—you must consider secured credit cards, getting someone to add you to their card as an authorized user, utilizing a co-borrower or other creative options that can be utilized to build your credit.
If you are applying for employment you must realize that
many employers will take your credit standing into consideration during the
If your credit management and credit score is not to their liking—you will more than likely not get a second interview.
Depending on the company and the type of job that you are seeking—some companies or occupations will weigh your credit file and credit score more heavily than others.
You must realize that many employers now conduct background checks and as part of that check your credit usage is scrutinized and if you show a pattern of irresponsibility—most will be hesitant to hire you.
If you are
seeking a home loan—whether it be at a
fixed rate, an adjustable or owner-financing—your credit and credit score will be
pulled and utilized in almost every case.
With a home being the biggest purchase for most consumers—lenders want to see that you can handle debt effectively—up front, prior to approving you for what is normally the largest loan that will be in your credit file.
Are you dependable in your repayment habits or are you potentially at risk for default? Those are just a few of the basic questions that loan originators want to know!
If your credit file shows late payments or other irresponsible use of your credit you may be denied the loan—or get approved for a loan at a higher interest rate and you may have to pay higher fees—depending on your credit score and credit habits.
If you were attempting to obtain auto or homeowners insurance and
possibly other insurance products your credit would play a role.
If you have great credit you can get great (the best) rates on your insurance products. If your credit is fair—you can expect to pay more.
The good news is that if you take your credit
from fair to excellent—you can normally get your premiums reduced on all of
your insurance products that use credit and credit scoring in the calculation of your premium—however, you must "ask" for the reduction!
If you were to rent an apartment or rental home—your credit
would play a major factor.
Some landlords have relaxed their standards some in regards to stringent credit standards due in part to the real estate and financial market downturns of the past few years—however for most consumers credit still plays a large role.
It is important that you get on a path to improving your credit.
If you have had a difficult stretch due to the market
downturn or any other reason now is the time to more effectively manage your credit.
If you show responsible use in your credit and you ended up defaulting on your home loan or rental agreement due to a distressed situation beyond your control—some landlords will take that into consideration when deciding whether you are a good risk and while considering whether or not they should approve the lease.
If you fail to pay your natural gas, electric and other monthly bills you will eventually be reported to the credit bureaus for non-payment—and your credit would suffer.
You must realize that even though the payment of your natural gas and electric bills are not reported to the credit bureaus for your benefit (generally)—if you fail to pay they will often report you to the credit bureaus for non-payment.
Keep in mind that the same applies for your medical bills, property taxes, utility payments and possibly other debt that you fail to pay!
Your non-payment—or untimely payment will lead many to report your poor repayment action to the credit bureaus—and by doing so your credit would be negatively affected.
What You Have Just Learned
By the way—did you pick up on the “acronym” or memory triggering device in this discussion?
You can go one higher—in your knowledge and application of credit or you can be a number one hire — “ace hire” when you apply for your next job if you have a thorough understanding of why credit matters and you are the “most qualified” prospect!
a—auto loan—you may need credit
c—credit cards—your credit file will be utilized
e—employment—your credit file may be pulled by your prospective employer
h—home purchase—your credit score and credit file will be scrutinized
i—insurance—your credit file will be used by insurance companies in many states
r—rental home or apartment—again your credit score and credit file will be scrutinized
e—energy—your utilities and other debt obligations may be reported if you are delinquent
OK—you now have a better understanding and practical application of why (purpose of) credit is important—for those who must utilize credit at this point in their life.
Be sure to use what you have just learned to benefit yourself and your family! Also, be sure to share what you have just learned with others so that they too can utilize credit more effectively in their life!
Final Thoughts on the
Purpose of Credit
If you are like most of us you will need to utilize credit
at some point in your life.
You must appear “worthy” in the eyes of those who are considering loaning you funds.
Whether you are borrowing for an auto loan, credit card usage, employment goals, home purchase or you have insurance product needs, rental goals or any other transaction that requires the use of your credit file—or credit score you want to appear at your best in the eyes of those ultimate decision makers.
You must realize that whether you think it is fair or not—your credit file and credit score defines your character in the eyes of others who do not know you or know your repayment habits.
You must do your best to pay all of your debt obligations in a timely manner.
Your goal should be to never get to a point where you will have collections, liens, foreclosures, judgments or late payments showing up in your credit file!
What You Must Do Now
If you now (or in the future) need to borrow money for any purpose—realize that your credit file and credit score will play a major role.
Whether you plan on opening a checking account or purchasing
that home of your dream—be sure to take the necessary steps on the front end to
ensure that your credit file is at a level that can get you approved for the loan that you
want at a good rate—or the best rate.
Be sure that you know where to go to find credit resources that will really move you forward and get you the results at the level that you desire and at a level where you can obtain a loan at a good (or the best) rate—throughout your lifetime or the period that you desire to use credit during your lifetime.
In addition, be sure that you put yourself in position so that you can utilize your credit in the best manner possible "for any other purpose" where credit is utilized in the decision-making process.
You possess the ability to make the decision today to manage
and improve your credit in a more effective way.
You can now use the proper navigation of this site to get
your credit future right.
You can now take direct action and gain a new level of
You can now put a plan in place to move yourself and your family along at a faster pace.
Always remember that if you really want to accomplish your goals you must have the mindset that you will not let unfavorable outcomes happen to you!
Quite the contrary—you must "make favorable outcomes happen" for yourself and your family!
If you have a desire not to utilize credit in your life and you are in position to effectively do that at this time—you should be commended.
For those who must utilize credit—or choose to utilize credit as part of their overall strategy to improve their credit and finances in a comprehensive manner or achieve other financial goals—you must do that effectively (make favorable outcomes happen for you and your family in an efficient manner).
You must know how to understand and utilize your credit properly—use your credit wisely and use credit in a manner that will benefit yourself and your family the most!
You must not let creditors and others who do not have your best interest at the forefront benefit by your improper use of your credit to their advantage!
You can "gain the mindset of not allowing unfavorable outcomes to happen to you" by navigating this site—and particularly the "Keys to Success" pages—that are on this site!
You can also gain the insight that is needed to make favorable outcomes happen in your life by improving your credit by going to our credit improvement page!
We wish you untold success in your credit and financial future from this day forward!
Why Purpose Should Direct Your Life
As you navigate this site and as you navigate life you must have the mindset that you will be receptive to comprehending and applying the knowledge that you will gain in order to move yourself and your family forward and obtain the credit, finance or any other success that you desire!
You must be receptive because if you desire real success, you must have a real understanding of what it takes to achieve the goals and objectives that you desire!
In order to produce the results that you desire—you must have a practical and highly effective way of approaching your situation.
You must realize that what you say and how you say what you say determines if it will be received by those who you communicate with!
You must realize that it is no accident that this site communicates with you in a manner that is designed to get you real results—right now!
On this site we present information in a manner that allows what you are learning to take root (foundation) in your life and produce the outcomes (goals and objectives) that you desire.
You can dream as big as you want with your credit and finances if you gain the foundation of credit and finance that you now have the opportunity to attain by navigating this site at this time.
What you comprehend and how you comprehend—the material on this site—will play a large part in how successful you will be in your and your family’s future!
You must use your "will" to process and comprehend the advice and information on this site at your highest level of mental comprehension, if you are one who truly desire success!
You must always realize that if you can conceive it and believe it—you can achieve it!
You must know the purpose of credit and you must know how to use it effectively and when to use it effectively.
You must also know the purpose for your life—at this time--and continue to operate in your purpose.
To go to the most powerful "credit page" that can be found on the internet that is designed for your and your family's future success—click on the following link!
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About This Article:
The above article was written by Thomas (TJ) Underwood. Thomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia.
He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and Managing & Improving Your Credit & Finances for this MILLENNIUM.
In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.
He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner.
He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind" and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.
You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page. You can also get highly relevant tips on "living your life more abundantly" and link to TheWealthIncreaser.com and possibly earn revenue by logging on to TheWealthIncreaser.com.
He is also an IRS registered tax planning professional with over 30 years of tax experience and can be reached at:
ATLANTA TAX PREPARATION SERVICE
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