Episode II - The Cost of Using Credit

Any Jedi, especially Zippity, would know that it is key to remember that CREDIT, the opportunity to borrow today and pay tomorrow, is a privilege and not a right. Many, namely those on the Dark Side, find this a difficult concept to grasp. Some think that CREDIT is out there for them to use when they want to use it!

It is important to remember that anyone wishing to access CREDIT will need to satisfy some key points. You need to ensure that those allowing you access to their money are comfortable with your ability to repay. A credit union, bank, credit company, department store, or any other institution or business offering CREDIT will review your current financial situation before allowing you access to CREDIT, their $$$.

What they are looking for:

• How long you have worked and how much you earn at your current job.
• Where you are currently working.
• How you have operated your personal bank account.
• How you have used CREDIT in the past, this is known as your CREDIT HISTORY. If you have had any credit…
• Any other CREDIT DEBT you currently are carrying, this may be a student loan, car loan, other credit…
• What you have to offer as collateral, car, house, investments… This is what you will lose if you don't pay-off any of your CREDIT DEBT…ouch…
• What is your CREDIT SCORE, this score is a number calculated on an equation based on your use of any CREDIT in the past.

If you can satisfy all the requirements of accessing CREDIT you are then introduced to the Cost of Using Credit. There is a cost in using someone else's cash over a period of time, this cost is called INTEREST. There are several factors that will influence the INTEREST RATE when you borrow from others and they can be related to your personal situation and broader factors affecting world markets.

It is the misuse of CREDIT that can lead to the Dark Side of Interest. Darth Credit can be dangerous and costly and puts many people in very difficult situations that will affect their ability to obtain credit in the future. In a worst-case scenario one may lose a portion of their income involuntarily…ouch… For this reason it is important to manage your CREDIT vigilantly in order to avoid the high costs of borrowing that can add up quickly and get you in debt fast.

Stay tuned for Episode III where we will discuss the Lighter Side of Credit and Smart Credit Goals, a feel good story of how to keep you out of trouble with your CREDIT.

Episode I - What is Credit