Credit Responsibilities for Borrowers

Responsible borrowing improves your ability to get more credit in the future.

Responsible borrowing improves your ability to get more credit in the future.

Borrowing money to pay for a house, car, boat or college education is routine for people in the United States. Using credit cards to buy the latest gadget or fashion is also common. If you are going to participate in the buy-now-pay-later spending culture, though, you need to understand your responsibilities as a borrower looking to keep a good credit score.

On-time Payments

Making on-time payments is one of your central responsibilities in borrowing. Lenders extend you a way to buy something now and pay them back over time. Your end of the deal is to meet monthly payment deadlines that include principal and interest balances. Missing payments significantly damages your credit score since your payment history accounts for 35 percent of your FICO credit rating, according to MyFICO.

Avoid Limits

Equity lines and credit cards come with credit limits. One of your commitments is to avoid going over your credit limit. The lender extends you a specific amount based on your income, credit score and existing debt usage. Having a high debt-to-limit ratio also negatively impacts your FICO score since it accounts for 30 percent of your score, indicates MyFICO. Going over your limit also incurs additional fees and can more significantly impact your score.

Contact Information

Ignorance is not innocence when it comes to a failure to let your creditor know when you change contact information. If you move, you need to let the lender know your new address, phone number and other contact data. Saying you didn't receive the statement typically won't fly, especially if you didn't tell the creditor that you moved. Many lenders and card providers offer online accounts where you can update contact information yourself.

Repay Debt with Interest

Your ultimate responsibility is to repay the entire amount of your debt plus your agreed upon interest. On a home or car loan, repaying your entire debt is necessary to get your lender's conditional lien removed from your title. Having outstanding balances on revolving accounts is always a risk since you could potentially lose your job or suffer an injury that prevents you from keeping up with payments.


About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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