Importance of understanding credit

 Credit is a when the borrower gets something of value which they agree to pay off at a later day mostly along with an interest.

Understanding how credit works is very important to avoid being caught in a debt trap.

The way to keep this in check is through a credit report. There are many websites which have credit reports for free. It is advisable to check your credit score every 12 months.

Credit beaures do not always remind us about checking credit scores so the best time to do a check would be around your birthday so it would not be forgotten.

Once you have the credit report, you should check it thoroughly to make sure that all of the entries are correct.

Some of the terms used are 1) Collection- These are those debts which are past 180 days due.

2) Charge off- These are those debts which even if you pay them off they will still remain on your credit report for 7 years. This is because the.company who you borrowed the debt from has lost hope of collecting the debt.

3) Closed- These are mostly for those credit cards whose accounts are closed due to non payment.