You can fix your credit

Keep in mind that all kinds of credit involve risk, both for the lender as well as the borrower. You take the risk that you will be able to pay later and so does the lender. How high the lender sets the interest rate tells you something about how he or she views this risk. As shown in the chart below, home mortgage interest rates, for example, are often substantially lower than credit card interest rates. Why? Because the lender can foreclose on your home and get some or all of the money back. But with most credit cards, the lender has no collateral and therefore fewer ways to get back the money – so the risk is greater.

Don’t misunderstand risk, however. It doesn’t mean lenders don’t want to lend. They do indeed, as the millions of TV advertisements and direct mail pieces that bombard Americans each year demonstrate. Lenders make their money by lending, that is, by collection the interest and fees they charge you for the convenience of using a line of credit or a loan. But like anyone, lenders try to minimize risk. They want the safest bet they can get for their money.