Credit Repair: What Is Credit?

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Credit Repair: What Is Credit?

Credit can be an extremely confusing, complicated and discouraging topic for many people. And in many ways, it’s designed to be that way. Credit bureaus and debt collectors have a lot of power over consumers and they take advantage of everyday people like you not understanding credit well enough to employ the best practices or defend yourself.

However, at Credit Restore, we take as much pride in educating people about credit, building strong credit and maintaining your healthy credit as we do in providing the best credit repair services available. Understanding the basics is a great place to begin, so today’s post will take a look at credit and just exactly what it is.

If you’re in need of credit restoration or credit help, please don’t hesitate to contact us today. We offer comprehensive, customized credit repair services based on a process that actually achieve results you want. Book an appointment today or receive an absolutely free evaluation to begin!

What is Credit and How Does it Work?

Credit is the ability to borrow money or access goods and/or services with the agreed understanding that you’ll pay for them later or over time. Lenders, service providers and merchants (known as creditors) allow you to purchase their goods or borrow money based on their confidence that you’ll pay them back, along with a finance charge that applies, called interest. Essentially, your credit gives them an indication of how reliable you are in paying creditors back, which informs their decision to give you money or sell you items on credit.

Once upon a time, creditors gauged your creditworthiness based on reputation, but that method was prone to error and manipulation. By taking into account your credit history (credit report) and other factors, you are given a credit score to indicate to creditors how likely you are to pay them back for the money borrowed. Three independent credit bureaus compile and summarize credit reports — Experian, Equifax and TransUnion. Creditors voluntarily report your borrowing and repayment info to those three bureaus in order to track and create credit scores.

Information in your credit reports includes:

  • The number of credit cards accounts you have, their borrowing limits and outstanding balances
  • The amount of any loans you’ve taken out and how much of them you’ve paid back
  • Whether your monthly payments were made on time, late or missed
  • Other financial setbacks such as repossessions, foreclosures and bankruptcies

A three-digit number is given to each person holding credit to quickly indicate how reliable they are to pay back the debt, which is known as a credit score. There are sophisticated systems used to calculate your credit score and they may differ in how they reach the final number.

Types of Credit

There are four main types of credit to keep in mind. Each should be taken seriously and factor into the strength of your overall credit. These are also areas to target when seeking credit repair.

Revolving Credit

This is your max borrowing limit and you can make changes to that limit. You must make a minimum payment each month. You can pay any portion of the outstanding charges, and partial payments carry forward the remainder of the balance or “revolve” the credit. Most credit cards are revolving credit.

Charge Cards

Charge cards are fairly rare these days. It used to be that retailers issued charge cards for purchases exclusively to their establishment, much like credit cards, but you can’t carry a balance. The total must be paid in full each month.

Service Credit

These are contracts with service providers such as cable, internet and gas and electric utilities. They provide services with the understanding that you’ll pay them afterward. These payments are not always reported to the credit bureaus, but they can be taken into account for your overall credit if they are reported.

Installment Credit

Installment credit is a loan for a specific amount that you agree to pay back, plus interest and fees, in a series of monthly payments over a set period of time. These are mortgage payments, car payments or student loans, most commonly.

Book An Appointment Today!

Are you ready to restore your financial health? With Credit Restore on your side, you’ve gained a powerful ally in the pursuit of credit repair thanks to the collective experience, knowledge and commitment of our credit repair company. We provide the best credit repair services available and make sure you’re involved in every step of our proven process.

To begin repairing your credit and for any other credit help, please don’t hesitate to book your appointment with Credit Restore today. Our team of credit specialists would love to discuss your situation and needs in order to form an effective strategy for credit restoration.