Military Officer - November 2008 - (Page 56)

C TAN T FINA NC IA L TOOL S. While credit is valuable, it also is easily abused. Because your credit rating follows you throughout your life, knowing your credit responsibilities and how credit works is important, whether you are applying for your ﬁrst loan or you’re an established borrower. This article can help you look at credit as part of the larger picture, from its beneﬁts to its responsibilities. CREDIT IS ONE OF YOU R MOST I M P O R- Used wisely, it can help you purchase products and services you otherwise might not be able to obtain. Credit allows you to spread payments for necessities over time and buy some luxury items that enhance your quality of life. ■ When using credit, shop as care- Using credit wisely Borrowing money and using credit can be advantageous in many situations. Unfortunately, some people get into trouble using credit — they borrow for things they really can’t afford or overextend themselves until they’re unable to meet all their monthly expenses. To avoid getting into ﬁnancial problems with credit, consider these guidelines: ■ fully as you would if you were paying with cash. ■ Shop for the best interest rate on loans by comparing the annual percentage rates charged by different lenders, and check for hidden charges and fees. ■ Don’t use credit to buy things you really don’t need. ■ Don’t take on monthly payments you know you can’t afford. ■ When you borrow, match the term of the loan to the purpose: for main factors the lender must assess: your ability and willingness to repay the loan. How a lender rates your ability to repay a loan is determined primarily by your income and your debts. If a large portion of your income goes to paying debts, you might be considered incapable of handling the burden of additional debt. Lenders also consider your job stability and any property or other assets you have such as savings accounts, automobiles, and houses. Even missing an occasional payment in tough economic times might show up on a credit report. example, if you’re borrowing for an annual insurance premium, the loan term should not exceed 12 months. ■ Protect your credit rating by making your payments on time, every time. ■ Contact your creditors right away if anything prevents you from making your scheduled payments. A lender also assesses your willingness to repay a loan by looking at reports from credit reporting agencies or credit bureaus. These credit reports show your history of debt repayment. A potential lender will look at a credit report to see if you have paid other loans as agreed. If the credit report shows a consistent pattern of late payment or nonpayment of debts, a potential lender might decide it is too risky to lend you money. Don’t borrow money to meet basic expenses, such as rent, utilities, or food. These expenses should be met from regular income. ■ Budget your income to save a little from each paycheck so you have funds available for unexpected expenses. ■ Don’t borrow money to make payments on existing debts (except for debt consolidation). 56 MILITARY OFFICER NOVEMBER 2008 How lenders make loans When you apply for a loan from a ﬁnancial institution, there are two

Table of Contents Feed for the Digital Edition of Military Officer - November 2008

Military Officer - November 2008 Contents From the Editor From the President Your Views MOAA Directory Rapid Fire Washington Scene Chapters in Action Financial Forum Ask the Doctor Financial Guidebook Out of the Red 7 Year-End Tax Strategies Cover Story: Memory Survives Something to Say MOAA Scholarship Recipients Pages of History Faces of MOAA Information Exchange Member Books Advertising Index MOAA Member Services MOAA Calendar Sounding Taps Encore

Military Officer - November 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.