Credit is an
integral part of life today in the form of rolling credit when we swipe our
credit cards or in the form on various loans that we may take from time to
time. Gone are the days when credit was supposed to be a bad thing. Earlier
generations shied away from taking loans and borrowing was frowned upon. This
is changed in the past few decades, now loans are no longer a dirty word;
getting loans is simpler, and there are multiple avenues available for people
who are seeking credit. Credit per se is not bad and any stigma that may have
been attached to it has been removed in the last few years but the way the
borrower treats credit makes it good or bad.
Is Credit Good or Bad?
As stated above
the way credit is treated makes it good or bad and there is no good credit or
bad credit per se. So how does the borrower’s treatment make credit good or
bad?
All loans are
extended with an understanding that the borrower will repay then in a timely
fashion as per the agreed terms and conditions. This essentially means that the
borrower needs to pay the EMIs on time every month and in case of credit cards
pay the amount due on or before the due date. Not doing so means that the
borrower has defaulted on the payment thus apart from attracting a penalty
charges and interest there is a negative impact on the credit score too.
Repayment history is the biggest contributor to the score calculation and all
delays in paying EMIs and credit card dues are reported to the rating agency
thereby affecting the credit score negatively for a considerable time.
