The numbers of people who have credit cards are increasing from year to year. More and more people are applying for credit cards these days. Credit cards seem to be part of modern lifestyle, due to their advantages and simplicity. People should use the credit card wisely so that they are able to have a good credit rating. Unfortunately, most people are not aware how important this rating is and how it might give impact to their lives.
Some factors will significantly determine the credit ratings. They are the debt accumulation as well as how the cardholders make the payments over their debts. The payment will be reviewed, whether it is always on time, late or into a default payment. You can expect to have a positive rating if you pay the balance on time. Otherwise, your rating will be poor and negative, especially when you do not pay the debt.
The range of credit card rating will go from 500 up to 800 points. The excellent rating will be 800 and the poorest one will be 500. When people get a good credit rating, they might get some other benefits too, such as a low interest rate. Generally, a new and young credit card holder will have a high interest rate around 12 up to 22%. Along with on time payments, they are increasing their credit ratings. Gradually, their interest rate can be as much as one single digit only.
If you have a plan to have major purchases, including house and vehicle, you need to start building up a good credit rating. You will need to make a down payment with a particular long- term loan for such purchases. This is when a good rating will give you the utmost benefit. Your down payment as well as the APR will be low. On the other way around, if your credit rating is poor, you are most likely required to give a bigger down payment with a higher interest rate.
Furthermore, the loan term will be 5 – 10 years longer too. For instance, if you have a good credit rating, you might be required to make 2 % down payment only over a $200,000 house. For the repayments, you might get a 6% flat loan for a 30 years period. Meanwhile, you might need to give 10% down payment from the total loan value subject to a higher interest rate and longer loan period. If you compare these two carefully, you will soon know how great the money difference involved here.
After reading this article, you will at least have a clearer picture of how importance to build a good credit rating. Therefore, you must use your credit opportunity wisely and make payment on time so that it can be your excellent investment in the future.