Your ability to borrow money or use credit depends on a number of factors including the availability of money, your previous willingness to borrow money, and your history of fulfilling credit obligations. Availability of money is determined by general conditions in the economy. Rising interest rates generally lead to less money for individuals and businesses to borrow. This means that individuals will not only pay higher interest rates, but it takes a better credit history to qualify for loans. Sometimes people feel hurt after being turned down for a loan. They often say, “I’m a great credit risk, I pay cash for everything.” However, those who do pay cash have no history or proof to indicate the type of risk they would be. If you haven’t borrowed money before, lenders have fewer clues in deciding to grant you a loan. They may take longer to decide to approve the loan, charge you higher interest rates, or turn down your loan application altogether. Were you aware that interest rates offered to you could vary depending on your credit report? If you establish a credit history early, you will have already done the necessary qualifying footwork that will greatly simplify a credit application when you need it. Of course, paying your credit bills on time tells lenders that you are a responsible user of credit.
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