Why Credit is Important
Anyone wanting to obtain a sizable loan, like a home mortgage, will need credit. More specifically, personal credit, and it is an unavoidable requirement in the lending process. Personal credit is comprised of several different factors: a borrower’s repayment history – whether or not they have been making their monthly payment requirements in full and on time. Their repayment history is reported on his or her personal credit report.
Types of Personal Loans
Previous borrowing experience – there are several different lending options for someone wanting to borrow money: credit cards, installment loans, such as auto, personal, and student loans, and revolving lines of credit, which may require a source of collateral and mortgages. All the borrowing option’s repayment history is factored and scored differently on a personal credit report. Larger loans, such as mortgages and installment loans weigh more on a personal credit report. If a borrower were to miss one month’s $500 mortgage payment, it would affect his or her credit score differently than missing one month’s $75 credit card payment.
Establishing personal credit and maintaining a good repayment history reduces a borrower’s future costs for loans – they receive lower interests offers on their loans.
There are several other products priced according to personal credit as well, and a borrower can make the most of his or her budget being a good credit consumer.