The Signs of Credit Use and Overuse - Essay Example

The over usage of credit builds up debts, that may cause trouble while making the necessary minimum payment every month. If there is any late payment more amount keep on adding to the previous and not being able to pay the amount we can be in the defaulter's list.

Damaged Credit and Lowered Credit Score
Overusing the credit may damage your credit or lower your credit score in various ways. For instance, if we fall behind on payments or default, it can jeopardize our credit image.

Thus these are the few signs that we can see if we overuse the credit facility. (What Are Some Problems With Credit Overuse, n.d)

2. Do you think credit has done more harm than good to the average consumer? How, and who is to blame?
Credit offers convenience to the consumer if and when they used it responsibly. If not used in a responsible manner, this may lead to overburdening of debt through accumulation on the consumer, which shall become difficult or impossible to service over a period of time, leading to financial difficulties, litigation, and bankruptcy.

The overburdening of debt can be explained best through the example of credit cards, which is the most common trigger of debt overburdening as well. Due to the very high rate of interest, using credit cards and not repaying the entire due as per stipulated period over a period of time results in the accumulation of huge outstanding dues on the consumer. Also, if a customer enters into a mortgage arrangement with high installment due, this leads to situations where the debts cannot be serviced by the consumer leading to foreclosure. This has been the main reason for the current sub-prime crisis affecting the western nations leading to the global recession.

The system of availing credit at our fingertips should be the main reason for harming consumers. More customers are getting bankrupt, thus affecting the entire economy of a country.
(Irby, n.d)

3. What sources of credit are available? Which do you think are better than others are?
The sources of credit that are available to us are -
Banks- banks offer us various facility but in this context, the most notable one is a loan, installment loans, credit card, overdraft facility, and others. They are elaborated below-
Loans- allows us to borrow money that has to be repaid with interest. They are used for acquiring or renovating a home, financing a new car, paying for college courses.
Credit cards- They allow us frequent transactions up to a maximum credit limit.

Bank overdraft-this is the additional benefit provided to the current account holders so that they can avail more amount than their bank balances.
Non-Banking Financial Companies- it provides services without addressing the legal description that the bank does; for instance, money lenders.
(How To Get A Personal Loan, n.d)

Bank facilities are better than the others as there is a definite amount that one has to pay along with an interest following some major guidelines than the rest of the institutions.

4. Do you think that credit (credit card, personal loan, or mortgage loan) is too easy or too difficult to get?
Acquiring a credit facility is much less hazardous than the yesteryears. Someone seeking a loan at the earliest can get it from the bank or other institutions without much delay. Today providing loans to the customers got a new dimension as today’s world runs on credit, and banks are daily inventing new ways to make the facility more user-friendly and useful. Today borrowers can avail of loans much easier and at their own terms and conditions as the numbers of banks in the banking business are increasing daily and gradually. Thus increasing competition has paved the way for easy accessibility of the loans to the customers.

5. Do you share the view that bad credit is better than no credit? Why?
Overusing the credit shall lead to damaging the credit reputation of a customer, or lead to lowering of credit score. This situation has a longstanding impact on the profile of a consumer can and act as a barrier to him getting loans in the future. This situation is known as bad credit, where the customer is refused a loan arrangement due to the past track record of his creditworthiness. This has the potential of credit being refused to a person when he actually needs it most and thus jeopardizes the future of the person concerned (Irby, n.d).
So as per my opinion not availing the credit is better than bad credit as the person’s reputation would not be hampered but he has to sacrifice his wants.
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