Credit Management Stream by Colin Phil

Credit management means that as a buyer or borrower, your payments are made on time, credit costs are balanced, and debts are handled in an honest manner that does not affect the relationship with the creditors and lenders. Bad credit management can make life increasingly complicated, from stopping you from getting the job you want to denying you the possibility to buy a car or rent your dream home. Having bad credit scores is an indication that you are a risky borrower and that decreases your chances of accessing a loan or a mortgage.

And it does not end here. Utility companies, such as gas and electricity providers also check your credit when applying for their services. Having outstanding bills minimizes your credit worthiness and they might ask you to pay a security deposit in advance to you being able to access the service. Similarly, when trying to rent a property with a poor credit, the landlord may be inclined to ask you to cover as many as six months’ rent prior to you moving in.

Insurance companies also check for credit as it is believed that lower scores are associated with higher claims filed. This means that if your credit scores are unsatisfactory, they are able to slam higher premiums without taking into consideration how many claims you’ve actually filed so far.

If you plan on starting a business and need to access funds from a bank or a creditor, bad credit creates obstacles in your way. You might’ve worked for years to put a business plan together and gather all the necessary data and figures only to have it all gone down the drain because of a poorly managed credit.

What can I do to avoid bad credit?

There are a couple of things you can look out for to avoid your credit scores going down. Payment history is among the major decisive factors. It may not seem like a big deal but paying bills on time or ahead of time positively affects scores and it shows that you can be trusted with a financial commitment. Credit use history is also something you should be carefully managing. Many credit score models are based on the concept that past behaviours usually predict future ones. This is why when a credit check is performed, all of your accounts both old and new are evaluated and generally, it is better perceived to have had a long and clean credit history.

Collections, repossessions and settled accounts are also big, red alarms that stay on your credit history. When you fail to make your payments, a creditor may be flexible in how they choose to deal with the situation, regardless if they settle for a less amount of money, send out a collector to try and gain the debt or collateral is reclaimed. In all situations, these bad behaviour signals can haunt you for over seven years and the effort you will have to put in rebuilding your scores will double.

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