Difference Between Good And Bad Credit

car loan applicationCredit is very important. Credit affects virtually every major buying decision that a typical individual encounters. Good credit in particular, can help you to get a good rate on a credit card, home mortgage or car loan or best personal loans. Good credit can also prove to be especially useful when it comes to getting a new job or to sign an apartment lease agreement. Let’s take a look at what good and bad credit is, as well as their major differences.

Good Credit

In order for you to get good credit, you need to have credit in the first place. Good credit ratings can be acquired if an individual borrows money and pays it back in full and on time. For example, if you have a credit card that you use to purchase your groceries, 2 times per month, each and every time you make a purchase with that card you are essentially making a promise to pay the credit card company back, whenever they send you a statement. If they send you the statement and you pay them back in full and on time, the credit card company subsequently reports to the credit bureau that you have in fact, paid on time for the specified amount. The more the credit bureau receives good reports, the higher your credit score will get.

Bad Credit

There’s nothing positive about bad credit. It is essentially the opposite of good credit. While good credit enables you acquire home mortgage loans and car loans at good interest rates, bad credit essentially prevents you from being able to purchase large-dollar items. Bad credit can also prevent you from being able to qualify for credit cards and can possibly hurt your chances of renting an apartment.

bad credit rating Unlike good credit, it’s fairly easy to get bad credit. Bad credit ratings happens whenever an individual fails to pay back money that is borrowed on time or whenever an individual does not pay it back period. There are various degrees of bad credit. However, just because a person misses a payment or two, it doesn’t mean that they will automatically be stamped with a bad credit rating. In the same breath, if an individual is continuously late, or if he/she fails to make a single payment for months at a time, the individuals’ credit rating will suffer as an end result. Fortunately, however, bad credit ratings can be fixed by making prompt payments as well as to execute responsible credit usage.