Think for a minute about your own credit habits. This may be either formally (with a lending institution) or informally (borrowing or loaning money from a friend or relative). How would you define good credit? How would you define impaired credit?
For example, as an employee, do you expect to receive your paycheck on schedule? What happens, if for some reason, you are not paid “on time?” How do you feel about your employer? Would this type of a situation make you wonder about the employer’s credibility or ability to manage money?
The same applies to making payments on loans or credit cards. First, you have to establish credibility that you can manage money by getting a credit card or small debt, and paying it back on time. If you go to a bank to borrow money, and there is no history of you ever having any credit, the bank may be reluctant to take a chance on you because it has no indication of whether you’ll pay back the money.
For example, as an employee, do you expect to receive your paycheck on schedule? What happens, if for some reason, you are not paid “on time?” How do you feel about your employer? Would this type of a situation make you wonder about the employer’s credibility or ability to manage money?
The same applies to making payments on loans or credit cards. First, you have to establish credibility that you can manage money by getting a credit card or small debt, and paying it back on time. If you go to a bank to borrow money, and there is no history of you ever having any credit, the bank may be reluctant to take a chance on you because it has no indication of whether you’ll pay back the money.
