Bad Credit And Good Credit
Author: Sebastian Schneider
Margaret was happy for her best friend and former roommate
Deborah when she announced that she was buying a house. Although
she was very happy for her friend, she couldn't help but to be a
little green with envy. Deborah recently applied for a home loan
through her bank and was turned down due to past credit issues.
When Deborah mentioned that she was approved for a home loan
from her bank, Margaret couldn't understand how her friend could
get approved for a home loan and when she still owed on her
student loan? Well, there is good credit and then there is bad
credit.
An example of good credit is debt that helps you build equity
or increase your net worth. For example, Deborah's student loan
is an example of good credit simply because having education
generally means that she will eventually have higher earning
potential. Purchasing a new home is also an example of good
credit because as it increases in value and will add to her net
worth.
Bad credits are the ones that negatively impact your financial
future. Bad credit is described as financial obligations that
last much longer than the item that you purchased. So, if you
purchased a computer back in the 1990's and you are no longer
able to use it, that's considered a bad credit. This also
includes debts that have no return toward increasing your net
worth.
So, how can someone improve his or her credit?
Maintain a good relationship with your creditors such as paying
your bills in full and in on time. Also maintain a strong
employment/self-employment history. Read your credit report
thoroughly and check for accuracy. Before making a purchase by a
credit card or loan, ask yourself whether it is good debt or
bad. Will this help to increase or decrease my net worth?
Credit experts recommend that debt should not exceed 25 percent
of disposable income. Too much debt can cause one to repay their
debts while struggling to maintain living expenses such as food,
clothing and shelter. Avoid going into debt by trying to
maintain a lifestyle such as shopping binges, expensive
restaurants and vacations.
Why is maintaining good credit such a big deal?
Besides being approved to buy a new car or a new house, it is
important to maintain good credit should an unexpected event
such as job loss or a major medical expense can put you into a
financial crisis for one who's not financially prepared. Having
good credit is important in case you have to borrow.
The Good News
Just because someone has bad credit doesn't mean that they have
to stay in that position.
There are many programs to help someone to get out of debt.
Having a negative credit history, does not mean a person cannot
purchase a nice home, a new vehicle, or start a business. There
are many programs that offer bad credit loans made especially
for those who have bad credit.
About The Author: For more in-depth information about bad
credit and debt solutions, visit
http://www.cc-debtconsolidatio
