We’ve looked at the following questions concerning buying a consumable item.

• Should I use Credit to buy the item?
• Have I found the best credit use or buy for the purchase?

Now let’s look at Question #3: How is my credit rating or score?

You often hear it said that it is an advantage to establish credit and build your credit score, but perhaps not as much is said about keeping your credit good. Once you establish credit, you are watched – not only your record of payments, but any reports about your activities from newspapers and other sources. Through national credit bureaus – Equifax, Transunion and Experian your credit rating (score) follows you all over the country and even to some foreign countries.

Keep Your Credit Good!

Protect this valuable property – your credit:

• Make payments promptly, at the agreed time.
• If you are unable to meet a payment, call your creditor or visit him and tell him what you will be able to do.
• Be especially careful to protect property until it is paid for.

Let’s look at Question #2 – Have I found the best credit use or “buy” that I could?

In case you missed Part 1 we looked at the question of – Using credit for this purchase?

Now let’s look at question 2:

The main sources of consumer credit are:

(a) Lending Institutions

• Credit Card Companies – VISA, MasterCard, American Express, Discover
• Credit unions
• Personal loan departments of banks
• Small loan companies
• Sales finance companies that take over credit “paper” from dealers.
• Pawnshops

(b) Retail sales establishments

Department stores, specialty shops, appliance stores, auto sales, for example. Such companies as Sears, JC Penney’s, The Gap, Victoria Secret and many more offer credit as a service.

The charges from these different sources vary a great deal. Take time to investigate. Find out what kind of service you can expect, what the cost and repayment terms will be. Do this before you make a bargain, for once you sign a contract, you’re committed to carry out your part.

Find Out the Dollar Cost. You probably compare prices on shoes, dresses, coats, housewares. Why not on the cost of credit?

Credit costs vary widely among different lenders and among stores that sell on the installment plan. In fact, costs may differ considerably among the various “plans” available from a single store.

It will pay you to take time to get the facts. You need to know more than the down payment and monthly (or weekly) payments — so take time to check your contract. The contract should give you

• (a) how much is to be financed ;
• (b) the amount of each installment payment ; and
• (c) the number of installments.

This is the way you figure cost: Multiply the amount of the monthly payment by the number of payments to be made. From this figure subtract the amount that is to be financed. The difference will be the dollar cost of credit.

EXAMPLE :1

A refrigerator costs $300 and can be paid for by making a $12 down payment and 12 monthly payments of $25.92 each.

Multiply payment amount X number of months to be made ($25.92 x 12) = $311.04

Subtract the amount financed (Cash price minus down payment) $300 – $12 = $288.00

Dollar Cost of Credit $ 23.04*

Total cost when bought on credit ($300 cash price plus $23.04
credit cost) $323.04

Note: The cost of credit equals $8 per $100 per year on unpaid balance of $288. This is equivalent to a simple annual rate of 14.8%.

Now on to Question #3 – How Is My “Credit Score or Rating”?

Buying on credit is so easy to do today. But, before you buy anything your need to ask yourself these 3 questions. They are:

• 1. Shall I use credit for this particular purchase?
• 2. Have I found the best credit “buy” that I could?
• 3. How is my credit rating?

In this 3 part series we’ll look at the questions one-by-one.

Question 1. — Shall I use credit for this purchase?

Before you answer this question, ask yourself and answer – several others:

(a) How will the payments fit into my family’s regular spending? If you haven’t been in the habit of budgeting (planning expenses before you spend), now is the time to start – before you take on installment payments. Will you have to go without necessities or other items that are more important to your family than this purchase? No one else can give you the answer. Sometimes it’s learned the hard way, by living with installment payments that are too big for your income. Sitting down together as a family and figuring all your living expenses ahead of time isn’t easy – but it might save a great deal of real trouble.

(b) How much will credit cost us? What’s the difference between the cash price and the price you’ll pay if you buy “on time”? Is it worth the cost to you to be able to make the purchase now on credit, and pay later? Or would it be better to use savings? Or to wait until you can save enough to pay cash?

(c) Will whatever we are planning to buy outlast the time we’ll be making the payments? Give long service? (It’s no fun to pay for “dead horses” !)

(d) Is this something that we will want as much when we are making the payments as we do now?

(e) Will it mean better family living? (Save time? Save energy? Give satisfaction to the family? Protect health? Make it possible for you to increase income?)

(f) Is our income certain for the length of time that payments will run? And do we have enough life insurance protection to cover the debt?

On to Question 2 – Have I found the best credit use “buy” that I could?