Credit & Debt

Credit is borrowed money you can use to do just about anything—purchase goods and services, go on a trip, even pay back other debts, or money owed. While this may sound like a great deal, there are a few things to remember about credit, most importantly that it all has to be paid back, with interest. This is usually called an annual percentage rate and simply defines what you are being charged for the right to borrow funds in the first place. And sometimes this rate is very, very high, so it’s important to check this out before agreeing to anything.

In an ideal world, the best thing is to avoid credit altogether and just pay for what you need with money you actually have. But in the real world, where costs often exceed ability, credit can be an invaluable thing, especially if you plan to purchase something big like a car or a home. In those cases, it’s nearly impossible to pay out of pocket, so credit becomes a necessity. To receive this type of assistance, you will need to keep your financial actions in good standing, making sure to always pay your bills on time. Credit grantors will review these records before considering you as a candidate, looking at factors like how long you’ve been employed, what you currently own, and your overall bank balance.

When you have a good credit rating, you are considered to be a worthy borrower because your record reflects a high degree of responsibility, reliability, and consistency. When you don’t, you will find it is difficult to pull yourself out of debt and get back on a successful track. The Fair Credit Reporting Act (FCRA) defines how this consumer credit information can be collected and used. It also ensures your ability to review your own credit report upon request, so you can dispute errors and assess your financial standing. Anytime you apply for something like a credit card or a loan, the FCRA supplies the lender with your entire credit history.

It would be nice if young adults did not need loans so early in life, but the reality of college expenses alone is often enough to make them unavoidable. While taking out a student loan is a serious commitment, it may be one of the few options available for those looking to realize their educational dreams. Luckily, these loans usually offer special terms and provisions that make them more affordable and manageable than other such agreements. Student loans typically offer lower interest rates, deferred payment options, and a grace period following graduation. Because the repayment plans and schedules are more lenient than most other types of loans, students can typically find work and get on their feet before taking on the payments. While the situation is slightly different, the same can also be said of home and auto loans. Although you may not be able to afford these things right away, knowing there are ways to slowly pay off a bigger purchase can be comforting, especially as your needs change with adulthood.

If you do plan to take advantage of available credit, it’s important to recognize the existing laws and your rights as a consumer. Without this knowledge, you may not know how to respond properly to any issues or problems that may arise. The Equal Credit Opportunity Act (ECOA) prevents lenders from discriminating against you (or anyone) based on factors like race, class, religion, age, marital status, or gender. According to the ECOA, credit must be given to anyone who meets the financial obligations of the service. Further, lenders are required to explain denials to applicants within 60 days of the decision and must include the specific reasons. Because your financial information is such an important part of your adult profile, it must be carefully handled by businesses in order to ensure your security and that of your future