Credit - Article 1.

THE BASICS OF CREDIT

In my work with middle class Americans (those who have to or had to, before retirement, work for a living), we discuss the various aspects of credit as much as we discuss anything else. The simple truth for most of us today is that "credit" is an integral part of our financial lives.

Many of us would never have been able to attend - much less graduate from - college without some sort of borrowing. And who among us would have been able to purchase that first house without a loan, whether from the bank or from the parents (or, for many, from both). Same goes for many of us with cars or with starting a business.

In fact, the availability of credit is a significant advantage to being an American in the 21st century. Well, that's one position we could take. On the other hand, the easy access to credit most of us enjoy can indeed cause significant economic distress, especially in the hands of those among us who are irresponsible, but often even among those with great intentions but some bad luck.

Culturally speaking, one of the most argued political issues is how much debt should our government incur and maintain. Notice that we no longer debate "whether" there should be public debt, just how much we can handle. Local governments employ debt to build schools, roads, water delivery systems, even parks (that's what bond issue elections ask us to authorize - public debt).

Capitalists everywhere borrow money in order to establish or grow their businesses, including the construction of physical plant, purchase of new equipment, acquisition of other businesses.

Yes, debt and credit are everywhere. So we are going to take the next several installments of this column to look at various aspects of credit:

	Why have credit and, by extension, debt? Or why not?
	What are the risks and the benefits (rewards) of credit?
	How do I best establish credit? If I already have it, how should I use it?
	How do lenders look at me when determining my creditworthiness? What can I do to obtain better interest rates when I am borrowing?
	What are the different types of credit?
	What happens when I run into trouble repaying the credit I have obtained?

Then, there are some corollary issues having to do with "modern" problems associated with credit:

	How do I protect my credit and my credit identity from misuse by another (identity theft)?
	What can and should I do if my identity is "stolen"?
	How best do I protect myself if I am an internet user and shopper?

Let's dig into this a bit.

IS CREDIT REALLY A GOOD THING?

"Neither a borrower nor a lender be" - does this sentiment appeal to you? Does Polonius (Hamlet, Act I, Scene III) speak to you when he says this? Not to me, for he was referring, if I have this right, to borrowing from a friend, not from the bank. Perhaps the Old Testament puts it more dangerously: "The borrower is servant to the lender." Proverbs xxii. 7

If one takes this Biblical admonition seriously, then one must feel it deeply unwise to borrow from another. So the argument FOR credit must be compelling. We'll see if such an argument can be mounted in the next installment.