Little about Credit
Just a piece of plastic and two little words Charge It and you can buy anything
from decorating your house to gift for your date, from gas for your car to
grocery and what not. It happens several hundred million times a day across the
US. So far so much that the US economy is often called a credit economy.
Credit or consumer loans have become an integral part of our lives. Loans are not only used to pay for relatively expensive purchases but also to cope with financial emergencies. The other reasons for loans are, convenience and investment purposes.
Unfortunately, while it is a win-win situation for marketers, institutions extending loans and consumers, there are also bad credit traps into which a consumer may fall. Unless loans are used judiciously, the buy-now-pay-later attitude can turn into a bad credit situation to the consumer, sometimes too serious to lead to bankruptcy.
Given the overall credit scenario of the economy, getting loans is easy. The tough part is servicing the loans in timely fashion. But this tough part is the most important element of consumer loans as it determines the credit standing of the individual. Wise use of loans and repayment of it on time avoids the situation of bad credit and establishes a good credit standing. This credit standing signals to the institutions extending loans that how reliable, responsible and dependable you are.
Institutions extending loans judge the credit standing by looking at your current job, length of employment, number of dependents, bank records and credit history. Consistently paying on time is the best way to build up a strong credit history. If you are late occasionally, say 2-4 times, you might be rated as bad credit consumer.
One way to avoid the bad credit is to be truthful while applying for the loans. This will help in fixing payment schedules that are comfortable to you and you see no more bad credit ratings. If at all you feel that you are in a difficult situation to make the payments on time, let the lender know and you will certainly get some help from the creditors such as restructuring of loan, granting of grace period etc.
A good credit standing sends vital signals about your reliability towards repayment of loans. Besides institutions extending loans, the other people interested in knowing whether you have a history of bad credit or not, are employers, landlords, marketers, insurance companies, mobile operators, etc. Therefore, the bad credit not only impairs you financially but also psychologically. The purchasing power of consumer drops sharply if he/she fails to avoid the bad credit.