People do not always have cash to purchase whatever they want to buy whenever they want to buy. There is always a gap between income and expenditure. The timing does not always match. This scenario underscores the importance of credit terms of purchase and payment in business. Sometimes credit arrangements such as hire purchase are more convenient to the buyer because they pay at their own convenience. On the sellers’ side, it is also a win situation because they charge some fee for the money on credit.
However, it is in the best interest of any credit firm or even individual to consider you credit worthiness before they can advance any credit facilities to you. Often, they will ask you to disclose your credit information. This may be in form of filling a designed form. They can also find your credit worthiness from your bank. How well you have been paying your loans with the bank will give them a bearing on your credit worthiness. Whether your cheques have been successful and frequency of taking bank overdrafts is very important to them. Credit rating bureaus also give relevant information about your credit worthiness.
Consistent default on loans, a history of bouncing checks, unpaid loans and mortgages combine to give you a bad credit rating. This scenario is no good news to your financial activities. The credit firms start treating you with a lot of caution whenever you approach them for credit advance. As a result, they will take you through rigorous processes before they can grant you any credit advance. Heavy collaterals will be required as security.
Now where does this leave you? Inadequate credit worthiness will leave you at mercy of your income which may not be enough to meet all your current financial needs. It will be very hard for you to access facilities like home mortgages, car loans and even medical loans. Getting some jobs will also be hard for you because they require you to be of good credit worthiness.
As a result your long term financial standing will be put in question because you have very few financial options, probably your income. Financial expansions for instance in business will not be possible which means that you business may remain at its infancy. Meeting some expenses like medical and educational fees will be very hard without a loan.
No doubt, your life, both economic and social will be in bad shape. Social status may even fall, negatively affecting your ego and confidence to face life. Therefore, it is very important for every one to keep good credit ratings to avoid being stuck in financial quagmire.