What is Credit?

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Use the Web to Take Charge of Your Credit

We use credit to make many substantial business deals, such as buying a home or car, or obtaining a loan. Other times, we simply want to use a credit card to make our daily lives a little easier. Whether you want to learn how to select the right credit card, protect yourself from identity theft, or learn how your credit score affects the loans you receive, the Web can serve as your guide to understanding, establishing, and maintaining good credit. For a Spanish-language version of the Guide, click here.

What is Credit?

The credit card industry mailed more than six billion credit card offers to households during 2005. Before you start frantically filling out the applications you've received and envisioning all the purchases you'd like to make, you should understand a few things about credit. The Web sites we've selected below will teach you the basics of credit, how it works, and how to use it wisely.

Dulcinea's Insight

  • Credit is more than just a plastic card in your wallet. It also reflects your status with lenders who decide whether to grant you a loan.
  • Watching your spending is part of using credit wisely to ensure you can make your credit card or loan payments on time every month. An online spreadsheet program such as Google Docs & Spreadsheets or Zoho Sheet can help you track expenses and income. Another way to keep track of your payments easily is to do your banking online. Check out the findingDulcinea Personal Finance Guide for advice and recommended sites that can help you do that.
  • Some decisions are too important to make entirely on your own. The Web sites in this section can give you a solid foundation of financial knowledge, but you should still consider consulting with an experienced professional when dealing with personal money matters.

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For an overview of credit ...
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Finding and Improving Your Credit Score

Your credit score can have an impact on many aspects of your financial life, perhaps none more directly than your ability to secure a mortgage or other type of loan. Use the helpful Web sites we recommend here to learn what your credit score is and the best ways to protect it so that you can obtain the credit or loan you need at an interest rate you can live with.

Dulcinea's Insight

  • According to the Fair Credit Reporting Act, you are entitled to receive a free annual credit report from each of the nationwide consumer credit reporting companies, which can be requested online: Experian, Equifax, and TransUnion. Also, read this article from the Federal Trade Commission, which discusses "imposter" Web sites.
  • Most credit information is reported to all three agencies, so your credit report (and score) may differ slightly from one agency to another. For this reason, it's worthwhile to request all three reports. Though yearly reports are free, the consumer credit reporting companies charge you for daily monitoring of your credit reports and other services.
  • Managing your debt is one way to improve your credit rating. Take a look at the "How can I manage or get out of debt?" section of our findingDulcinea Debt Guide for Web sites that teach additional debt management skills.

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To learn what a credit score is ...
To learn about the effects of good and bad credit scores ...
To obtain a personal credit report ...
To improve your credit rating ...
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Choosing the Right Credit Card

There are credit cards to suit a unique array of personal needs. Flight miles, cash-back rewards, discounts on certain purchases, and low interest rates are just some of the perks you'll find. There are several factors to consider when you're selecting a credit card, and some helpful Web sites can guide you in choosing the card that will be the best fit.

Dulcinea's Insight

  • Many credit card companies help you sort through the benefits of their various credit cards. Try to find a comparison feature on a lender's site that allows you to compare offers next to each other rather than going back and forth between pages.
  • Many major banks offer credit cards, and you will find information about the available cards at the bank's Web site. Other organizations, such as the American Kennel Club and the Aircraft Owners and Pilots Association, offer branded credit cards through major banks; your use of these cards benefits the organization financially. If you are a member of these organizations or others, you might want to check their Web sites to see if they offer such credit cards.
  • If you have poor or no credit, you might still find a card to suit your needs. The Web sites of major credit card companies generally have sections dedicated to consumers who fall into this category.

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For general advice about choosing a credit card ...
To find the best interest rates ...
For help comparing credit cards ...
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Credit Card Debt

If you're even asking this question, the answer is probably yes. In fact, because credit card debt typically carries the highest interest of any form of debt, any at all can be too much. If you find yourself struggling with credit card debt, the Web can be a good source of ideas to start correcting the problem.

Dulcinea's Insight

  • Your credit rating can affect your finances for years to come. Despite the good advice you can find on the Web about reducing or consolidating your credit card debt, you should always speak with a qualified accountant or other financial professional to begin your debt reduction.
  • Some debts, such as those with higher interest rates, are better to pay off before others. MSN Money can help you sort out which debts to pay off first in this article. Sometimes lowering your credit card's interest rate can be as easy as asking. Credit card companies often grant such requests, especially to customers who usually pay their bills on time.

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To learn how to avoid credit card debt ...
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Teens, Young Adults, and Credit

Approximately 83 percent of undergraduate college students possessed at least one credit card in 2001, according to student loan service company Nellie Mae. With credit card use spreading among young people, the importance of understanding credit and its effects on finances is paramount. The Web has helpful information for young adults who need to establish and maintain good credit, and for parents on how to get their children started using credit responsibly.

Dulcinea's Insight

  • Many credit card companies offer free t-shirts or music downloads as incentives to apply for their credit cards. However, high interest rates or hidden fees that come with some cards are a poor exchange for the "freebies" you may find appealing. Instead of signing up based on impulse and enticement, use College Plastic, described below, and the sites in the "Choosing the Right Credit Card" section of this guide to make informed decisions on which cards to choose.
  • This article from MSN Money offers advice for parents who want to teach their teenagers how to use credit cards.

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For help deciding whether your child should have a credit card ...
For college students ...
For teenagers ...
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Protecting My Credit

With so many people using credit cards, credit card fraud has become a lucrative "business." The Web can give you some helpful tips for protecting your identity.

Dulcinea's Insight

  • Checking your credit report regularly online can help you detect fraud or identity theft and. You don't have to wait until you receive next month's bill to make sure all your charges are legitimate.
  • When shopping online, avoid making any credit card purchases while using a wireless Internet connection unless you're sure that the connection is secure. For more tips on protecting yourself against fraud and identity theft online, read the findingDulcinea Internet Security Guide.

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To learn about credit card fraud ...
For identity theft information ...
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What is a Credit Union?

If interest rates are starting to look too intimidating, it might be time to consider a credit union, where members pool their money and loan it to each other at relatively low rates. The sites we've selected can teach you more about credit unions and help you find one in your area.

Dulcinea's Insight

  • If you want to verify the security of a credit union, you can either check its "Safe & Sound" ratings at Bankrate or request a financial memorandum or recent financial statements straight from the credit union.
  • To answer more specific questions you may have about credit unions, search for a "Consumer" page on the Web sites we've listed below.

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Home Equity Loans and Lines of Credit

Home equity lines of credit have much lower interest rates than credit cards and are more flexible than traditional home equity loans. However, they're not a good solution for everyone. If you're searching for additional credit, use the Web to learn if a home equity line of credit could meet your needs.

Dulcinea's Insight

  • As with any credit obligation, home equity lines of credit carry significant responsibility. You could lose your home if you don't repay the money you've borrowed, along with the interest included.
  • Before applying for any home equity loan (also abbreviated as "HELOC") or line of credit through an online lender, make sure to check its credibility through an organization that oversees fair lending practices. We've included links to a few below.
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