Everything revolves around credit—the type of loan you receive, perhaps the rate you’re quoted, and even whether you get the approval you want or not. It all boils down to credit.
Your credit is defined as both your ability and your willingness to pay back your creditors. Ability means that you can afford to pay back your creditors, and willingness means that you have the inclination to do so. Both components need to be present to establish a good positive credit history.
How do you get a history? Businesses that you borrow from send your payment patterns to a great big centralized database. Actually, there are three great big centralized databases; they’re called Equifax, Trans- Union and Experian.
Businesses that extend credit to consumers pay money to access these databases as well as putting consumer payment information into them. If you pay Widget Factory on time every month, then Widget Factory sends those payment patterns to the various databases.
If you apply to another company for credit, that company will tap one of those databases with your name, your social security number, and other personal data about you and review how you’ve paid other businesses. If the company’s credit extension guidelines match what you want from it, then, voila` , you’ve got a new credit account.
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