Credit is one of the more important aspects of life today. Without credit, it's becoming increasingly difficult to perform tasks that used to be quite simple... things like renting a car, or reserving a hotel room. This guide looks at what a credit score is, what effects it, options for new credit lines regardless of your credit score, and the dangers of bankruptcy.
Most people will agree that credit is one of the most important things in life. If you don’t have credit, then it seems almost impossible to get credit… and if you have bad credit, then everything that you want to buy is an uphill struggle to get payments for. Of course, if you have good credit then you’re swamped with offers for new credit cards and credit lines… everyone wants you to use their product.
In this day and age, it’s becoming increasingly harder to get by without some form of credit card. Online services may require credit cards for payment or address verification, car rental companies often want a credit card number to place a deposit on, and hotel reservations usually have to be pre-approved via credit card. If you’ve thought about getting a credit card but weren’t sure which one was for you, or if you’ve thought that no one would issue credit to you because of credit problems in the past, you’re in luck. There are credit options available to just about everyone, regardless of your credit rating.
Exactly What Is a Credit Rating, Anyway?
Your credit rating is a number that’s assigned to you by the various credit reporting agencies, based upon past and current lines of credit and the reports that they received from your creditors. Someone who always makes all of their payments on time, who has had established lines of credit for a long time, and who keeps the balance on their line of credit low will have a much higher credit score than someone who’s missed payments, defaulted on credit lines, or who keeps their lines of credit maxed out pretty much every month. Pretty much any new line of credit that you attempt to take out will first require a check of your credit score (often from two or more reporting agencies, as the score can differ from agency to agency), and from that score they’ll determine whether you’re more likely to pay on time or to miss payments.
Of course, if you have little or no established credit then you might get the raw end of the deal. If you don’t have a credit report on file with the agencies, or if your report is pretty much empty except for 1 or 2 items, then you might be withheld credit simply because the company doesn’t really know how much of a risk you are and doesn’t want to take the risk of losing money if you do end up being a big risk. Of course, other factors may come into play as well if you don’t have any real credit to speak of… college students are often given multiple credit offers within their first 2 years of school, since even though they might be a large credit risk there’s also a good chance that their parents will bail them out if they get in over their head.