At some or other time in your life, more sooner than later, you are going to want to borrow money to study, to buy a car or to buy or rent a place to stay. Creditors are there to lend you this money but they do not easily grant credit because they don’t easily trust borrowers to pay them back.
There are different kinds of credit and each has different implications on your credit score and we look at the way they work.
Revolving credit
Revolving credit is one of the more common types of credit and different from non-revolving in many aspects. It can take the form of credit cards and is taken out by individuals and businesses. This type of credit requires only the minimum payment of interest, as well as any fees there may be.
It allows customers to access money up to a certain predetermined credit limit. Once the customers pay an amount on the revolving credit, that amount is available for use again. Revolving credit also happens to be a good indicator of credit risk and impacts your credit score.
Where can you go with your credit woes?
It can be such a blow being turned down for a loan or even a credit card because how are you ever going to get that car you need? Maybe there are things you have done, which have made it hard to get credit. Fortunately, Kikoff can be the solution you need.
With their credit-building loan, you can actually build credit free of charge. With a free credit builder from Kikoff, you get a small loan amount and you have to make a tiny payment each month and on time to show your financial responsibility.
This credit builder loan has no interest or fees. The company will then report your steady payments to the credit bureaus and you build up good credit. As long as you make your monthly payment, a credit builder loan from them can help you at last build a credit history.
Installment credit
With this kind of credit, you are borrowing a fixed sum of money. You will have to make monthly payments of a specific amount to get the loan paid off. The interest rate with this kind of credit can be fixed or variable. This type of loan can also come with other fees, such as late payment fees.
A typical example of an installment loan is a mortgage. They come in payment terms of 10, 15 or 30 years as an example. This is a loan most people are familiar with as it is to buy a home. The home acts as collateral, meaning that if you fail on your payments, the lender can take possession of your home.
Charge cards
Used much like credit cards, charge cards require you paying the balance in full at the end of the particular billing cycle. The benefit of the charge card is that you have to be a responsible payer as it requires you paying off the balance each month.
There is no interest on the card balance as you cannot carry a balance beyond the payment period. There are penalties if you don’t pay your full balance by the due date.
Open credit
Open credit is a pre-approved loan. It isn’t as common as revolving credit and with it, you can borrow from up to a maximum amount but then you have to pay back the full amount each month.
Usually, this open credit is associated with charge cards. The borrower can make repeated withdrawals up to a certain limit and then make repayments before the payments become due. Interest is only charged on the credit the borrower has used.