The Ins and Outs of Credit – What Does it Actually Mean

With the rise of mobile technology, credit cards, fibre internet connections and many more ingenious inventions, we live in the ‘now’ era. We have become accustomed to getting our deliveries in as soon as possible, connecting to friends immediately, finding out cinema screenings with the click of a button and more. It should come as no surprise that we also feel this way about paying for things.

Whereas a few decades ago we would save up for years in order to buy something we wanted, nowadays we can easily buy it on ‘credit’. Essentially credit is the concept of ‘buy now and pay later’, where we can take our loans of money from something as small as a packet of cigarettes to something as large as a car or a boat, with the expectations that we will pay off the debt at some point in the future. This can be done in a lump sum or in small payments, depending on the preference of the lender.


Unfortunately this idea of buying for something before you have the money to buy for it is getting a lot of people, both young and old, into rising debt nowadays as they find themselves unable to cope with the repayments of buying things on a whim. When you pay for something with cash, if you don’t have the money then and there, you don’t buy it. However, if you pay for something on credit, the concept of having to ‘pay’ for that item is no longer there, you pay for it ‘in the future at some point’. It becomes a lot vaguer and this is where you can have issues with financial responsibility etc.

Applying for Credit Cards, Loans and Mortgages
When you are looking at ‘buying now and paying later’ it is important that you find the right type of loan for the purchase you need. Whether you’re applying for a credit card, a larger loan or something on the scale of a mortgage, certain details are needed about your life, your work, your spending habits and so on. This is essential in order to discern whether or not you would be a safe ‘investment’ and whether or not your debts are likely to be paid.

If you are not considered to be a good ‘investment’ (I.e; you have no means of repaying any debts as you have no source of income), then it is unlikely that any applications you make will meet with much success. Unfortunately if you want to have money loaned to you, you must first prove yourself to be a ‘trustworthy’ investment. If you have bad credit history or no credit history, this can also work against you.

Who Is Scoring My Credit?
There is no universal credit ‘score card’ as each company performs an individual credit check when you apply for a loan or credit card, and scores you differently. However if you seem to be having trouble successfully applying for any kind of loan, then it might be a good idea to request a free credit report online, to see whether or not there are any patterns.

Bad Credit and Good Credit
Good credit is the best kind of credit. It shows that you are a worthwhile investment and are highly likely to pay off all your debts and on time. Lenders love people with good credit as they can be sure that they will get a return on their investment.

Bad credit, as the name suggests is when you regularly fail to make repayments on time or at all. You run up debts that you fail to pay and you end up costing the lenders more than they would make back on you, so people are less likely to lend to you in the future. This can make it much harder to get credit cards, loans and later on even mortgages if you continue to reject payments on any loans you are successful in applying for.

How to Repair your Bad Credit
Nobody wants bad credit, so it is important that you know how you can successfully repair your bad credit. This can be done in three simple steps;

  1. Get a credit report – You cannot begin to make amends if you don’t know where the problem is. A credit report will be able to show you where your bad credit lies and then you can start rectifying the situation.
  2. Make a Payment Schedule – If you are not smart with your money, making a payment schedule is essential. It will let you know how much you need to repay and at what time. It is great for getting you back on track with your debts.
  3. Pay your bills! – It might sound like an obvious choice but it is one that people seem to prefer to ignore. By paying your bills and your loans on time you can swiftly help to erase any and all bad credit, putting you back in the good books of the lenders.

Of course it is not always as easy as it first appears when you are dealing with good and bad credit. Some companies will recommend that you avoid loans and credit cards altogether, however life does not always work out that way. It is good to have lending companies to rely on in extreme situations, it is just important that you stay smart with your money and keep up your repayments in order to avoid falling into bad habits and into the bad credit zone.

Article provided by Solution Loans, a technology-led finance company specialising in providing expert advice to customers in search of credit – helping to find the most suitable package for each person.