Most of us take advantage of credit at some point in our lives. This is what we resort to in times of emergency when we don’t have extra funds to pay important bills or buy other basic needs.
Credit can be good or bad. This will depend on people’s behavior towards their debts ranging from the different types of loans to credit card bills.
People who avail of credit are constantly being monitored by rating agencies, lenders and credit card companies. They have records which list the repayment activities of borrowers for several years. This is then used as a gauge to determine a person’s credit status.
A person earns a good credit rating based on several factors. One is prompt payment which means the borrower is able to repay his dues on time on a consistent basis. Secondly, the person is able to pay off his or her balances through the years. This positive behavior then can help any borrower take advantage of lower interest rates. And with a good record for credit, he or she can easily take out new loans when needed.
As far as bad credit is concerned, this can result from various factors as well. One reason is missed or late payments. You should know that failure to pay your mobile phone or utility bill in a few days can already earn you an unfavorable rating. When monitored by lenders, this can even be a cause of the disapproval of your loan application.
Default is another cause for gaining a bad credit record. A default results when a monthly balance is not paid after 60 days. This record then remains with the credit rating agencies for five years and again, this could lead to your loan application being turned down.
Bankruptcies are also a sign of bad credit behavior. By bankruptcy, this means that a borrower or debtor no longer has the ability to pay what he or she owes to lenders and credit companies or the so called creditors. A debtor usually takes responsibility in filing for his or her bankruptcy.
What then should be the right attitude towards credit? Constant checking of your credit rating is very important. This will help you keep track of what you owe and plan on how to settle your debts.
Paying on time is another step you need to take. But take note, paying promptly should not only be done for a month. If you can be consistent with this attitude, then continue with it moving forward. When you have available funds, sit down and list down your priorities and then pay right away. Don’t wait for tomorrow if you can pay your bills today. Change that last minute behavior if you can.
So whether you have outstanding short term loans ranging from the payday to the cash advance loans or you have credit card bills, you need to pay them in a timely fashion. This will not benefit anyone else but yourself. A big advantage is being able to avoid additional finance charges that can only further hurt your finances.
