Consumer credit is borrowed money allowing individuals to pay the full price of items at the time of purchase. Credit cards, home mortgages, automobile loans and merchant-direct financing are all forms of consumer credit, according to Cornell University Law School. While taking out such loans leads to debt, several benefits exist for using consumer credit.
Building a Good Credit History
The three primary credit bureaus -- TransUnion, Equifax and Experian -- keep track of your credit through a three-digit number known as a credit score or Fair Isaac Company, or FICO, score. Banks, lenders and credit card companies use this number to decide whether or not to grant you a loan, approve your mortgage application or issue you a credit card. Additionally, many employers use credit information to make hiring decisions. Obtaining and making timely payments on your credit cards, mortgages and auto loans raises your FICO score, preventing you from experiencing the pitfalls of poor credit, such as being denied jobs or paying higher interest rates on loans.
Investing Cash
Making purchases on consumer credit keeps you from spending cash, allowing you to save it in an interest-yielding money-market account or invest it in stocks, bonds, businesses or retirement funds. While you will have to pay back -- with interest -- credit card purchases, home loans and automotive financing, saving or investing your cash wisely instead of spending it on homes, cars or consumer goods can give you the opportunity to make extra profits and come out ahead overall.
Making Large Purchases
Getting a mortgage or car loan allows you to purchase a home or vehicle without fronting a large amount of cash. This allows you to become a home owner or obtain a vehicle in a relatively short amount of time, because you won't need to save enough cash to make the full purchase price of the item. Additionally, buying a home or vehicle on consumer credit lets you spread the costs out over time, rather than losing a large sum of money at once.
Having Emergency Funds Available
Getting consumer credit, including credit cards, car loans and mortgages, allows you to avoid spending cash for items such as a house, car, clothing, food and other goods. Because of this, you can stockpile cash for emergency purposes, such as a job loss, layoff or injury leaving you unable to work and earn money. Additionally, if you are unemployed, you can make basic essential purchases, such as food and utility bills, on credit and use your cash to make credit card bill payments and save for when credit runs out, says Steve Bucci, a debt expert with Bankrate, an online consumer finance source.
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