Crack the Credit Code
Discover what you need to know about credit. To control your credit, you need the facts!
Chapter 1 – What is Credit?
Before going any further into the subject of credit, it is important to make sure you know exactly what credit is.
There are two definitions that need to be understood. First is the regular use of the word and the second is the one used by the credit bureaus.
Merriam-Webster dictionary defines credit as “financial or commercial trustworthiness. Oxford dictionary defines it as “the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future”. The word credit comes from the Latin word “creditum” which means to believe or trust.
Essentially, credit means that someone trusts you enough to give you something based on your promise to pay them in the future. The more they trust you, the better the terms. This is the original definition but it has evolved into something else.
In today’s society, trust has been transferred into a score that is used to determine how much you are trusted to pay a debt. Instead of just using payment history as the basis for lending decisions, credit reports are available so potential lenders have all the information in one place as well as an arbitrary scoring system that assigns a number to your report.
That number, whether good or bad, fair or not, is the most important part of your credit report. It is used as the first 18 step in determining if someone may qualify for a loan, whether that loan is a credit card, a mortgage, a car loan or anything else.
With the advance in technology, it is easier than ever to keep track of everyone’s history of paying their debts. But credit is no longer based only on your payment history. If it were, there would be less need for scores.
Credit scores are determined by many other things than just payment history. This has made it a much more complicated subject. The credit bureaus have such complicated calculations that it is virtually impossible for anyone to figure out exactly what their score would be.
They have made it necessary to use their scores in order to be in agreement with the rest of the lending world. Taking these steps makes it possible for lenders to get money from other sources. Everyone using the same system to decide the credit-worthiness of people who ask for money makes it much easier for them to attract money.
Even though the scoring system is flawed, it actually makes it more possible to borrow money because it gives information in a standard format to those who want to lend money to others. They can make an informed decision based on the credit reports and scores, using the information provided to elect what terms they will offer, if any.
This system has changed the definition we all use for credit. In spite of the dictionary definitions given above, the current definition of credit is tied more closely to a credit score and is often defined as either the score or the report.
When someone asks you what your credit is, you probably think about your score as your first answer. If not, you will soon realize that is what they are asking for.
When I had bad credit, I remember a time when I needed to buy a car because the one we had needed repairs and it was no longer worth repairing. I went to the dealership and, because I had bad credit, I was treated like a second class citizen. The salesman was rude and the finance manager treated me like dirt. But with bad credit, I didn’t have a lot of options. As a result, I ended up paying more than I should have for a car that was poorly built. And I got a bad loan that made a crappy car even more expensive. It was bad all the way around.
Years later, when I knew what to do do control my credit, I decided to buy a new car. I took the necessary steps to get my credit where I wanted it before shopping for a car. I went to the dealership, told them what I wanted and I got it, along with a zero percent loan. I was treated with the respect that everyone deserves when they want to buy a car (or anything else). And it was all because I knew the facts about credit and used them to get the score I wanted.
This made me realize that you don’t just get better loans when you have good credit. You also get better prices and you get treated better.
Wow! Crack The Credit Code gives the straight info about credit! Very practical knowledge. Knowledge no one else out there really teaches. And not knowing it can cost one a fortune!
Credit is unfortunately not a subject taught in schools yet a heavy majority of American adults use credit in some form or fashion in their lifetime. This book is a must read for everyone!
This should be mandatory reading for all. I wish that school would teach real life lesson like this!
ABOUT THE AUTHOR
Todd Wilson has spent almost two decades learning about credit. After experiencing the effects of not knowing enough about it, he made it his mission to research the smallest details.
This book is the result of that research, giving you the tools to avoid making common mistakes and to rebuild if you have already made them. The biggest reason for bad credit is not having a proper education on it.
Finally, this problem is solved!
what you need to know about credit!