Fifth Third Bank

Understanding Credit

What You Need to Know about Credit

These days, most people use some sort of credit to make purchases, improve their homes, and more. But not everyone understands some of the basic principles behind credit. If you're new to using credit, or you aren't sure how to manage it, here are a few things we at Fifth Third Bank think you should know...

When you pay back borrowed money, you usually have to pay the actual amount you borrowed, plus interest and/or some other fee.
Credit is offered in various forms, including:
Lenders look at your credit score to determine their willingness to lend you money

 

How Credit Can Help You

When used wisely, credit can be a good way to manage cash flow. For instance, you can use a credit card to pay for common monthly expenses—like utilities, groceries, and insurance—and then pay the card off in full each month. This way you have just one payment to make, instead of sending multiple checks to different product and service providers.

Remember:
Pay off your borrowed amount quickly. If you pay your full credit card balance each month, for instance, you won't be paying interest fees on top.

You can also use credit offers to build a history of good bill payment. When you make credit payments on time, every time, you're establishing a good credit rating—and that can help you qualify for future home mortgages, car loans, and more.
 

Tips for Making Sound Credit Decisions

While there are some great benefits to using credit, there are some downfalls, too. If you don't manage your credit usage carefully, you may run into financial problems. Here are some tips for using credit wisely:

Make payments on time, every time. Late payments can result in costly fees, and increases in your interest rate.

Take note of special offer periods.
Pay more than the minimum.
Prioritize your purchases.
Be cautious about using cash advances.
It's best to set a budget.