Any time you take out credit for the purposes of making a purchase, or for any other reason in fact, this information goes onto a file which is held by any one (or more) of a number of credit monitoring agencies in your country.

Any payments you make (or miss) and any changes to your account are recorded on this file. Depending on the agency, your credit rating is judged on the basis of the information held on this file.

Any payments you make are given a positive score (the higher the payment, the better the score) and any you miss are given a negative score.

The scores are tallied into an overall score marking your credit history, and your worthiness for further credit. This is then consulted by any company or lender who wishes to appraise your application for credit.

If you have a history of missing payments, then the low score you receive will make it less likely you can secure credit for a further purchase. A history of making payments on time and in full will make it more likely.

Of course, there are other things taken into account. Your monthly income is also important, as even people who are very responsible when it comes to making the payments expected of them will struggle when it comes to paying a monthly payment that makes up a significant portion of their monthly income.

Over commitment is a major reason why people fall into serious debt, so pay attention to your commitments.