After being accepted for a new credit card, you'll most likely hear or read about these terms when you get your card and disclosures in the mail.
Here are five common credit terms that everyone should know before they start using credit:
An annual percentage rate, otherwise known as an APR, is the interest rate that is charged monthly on any outstanding balances. How much this interest rate is dependent on the type of card that you are using.
This is a three-digit number that shows how reliable of a borrower you are. It can range anywhere from 300 to 850 and the higher it is, the better. Scores raise and lower depending on how responsible you are with your credit.
This is the percentage of the credit that you are currently using. For example, let`s say you currently have three credit cards and their combined credit limit is $40,000. If you currently carry a balance of $6,000, this means you have a utilization of 15%. Keeping your utilization at 30% or under is usually recommended in order to keep your credit score high.
For someone who may have difficulty being approved for loans and lines of credit on their own, they may look to a cosigner. This person will become equally responsible for ensuring that the debt is paid and will become liable if the primary signer defaults on their payments.
This is the current balance on any credit card that doesn`t include interest or any other fees associated with your account.
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