What is the ability of credit and how it is calculated?

What is the creditworthiness and how it is calculated?

  

At the beginning of the definition:

Several firms have developed rating systems to determine an individual or company's credit worthiness. It is important for each person to keep track of their credit score because this is the main metric used by institutions when determining if the individual is worthy of a favorable rate.

Credit scores are based on your credit history and can generally only be changed over time. "Credit repair clinics" often claim they can remove negative information from your credit report for you, but beware - these claims can sometimes be false and may even be illegal. Here are some illustrations of the "dos" and "don'ts" of creditworthy behavior:

Do:

• If you have missed payments, get current and stay current.
• Pay off debt rather than shifting it to other accounts.
• Pay your bills on time. 
• Re-establish your credit history if you have had problems. 
• Keep balances low on credit cards and other revolving credit.
• Apply for and open new credit accounts only as needed.

Do Not:

• Close unused credit cards as a short-term strategy to try to raise your score
• Open a number of new credit cards, just to increase your available credit.
• If you have been managing credit for a short time, avoid opening a lot of new accounts too rapidly. Adding new accounts will lower your average account age, which could have a negative impact on your credit score, particularly if you are a new credit user.

To illustrate how credit scoring works, consider the following example that uses only three factors to determine whether someone is creditworthy. (Most systems have 6 to 15 factors.)

 EXAMPLE

Monthly Income  --  Points Awarded

Less than $400          0
$400 to $650            3
$651 to $800            7
$801 to $1,200         12
$1,200 +               15

Age

21-28                  11
28-35                   5
36-48                   2
48-61                  12
61 +                   15

Telephone in Home

Yes                    12
No                      0

What you should know about loan consolidation?

For people who can not cope with the repayment of several loans - it could be the financial lifeline! This wheel is a consolidation loan. What is this type of loan? Who can it be granted? When should I apply for it? What are the obligations it brings with it?

 

When you apply LOAN CONSOLIDATION? In many cases, and in many forms, such as: 

- as a necessary escape from the "loop debt" when destroying our various commitments and liquidity already lost (or fear that it will occur in the near future)

- as an economically viable replacement possessed, more expensive debt in various forms (credit cards, line card in the personal account, cash loan, a car loan, etc.) in one, long-term loans: to significantly reduce monthly payments.

- as a prophylactic, if in the near future, we plan a number of shopping (furniture, change of home appliances, etc.), or other expenses (attractive destinations) and we do not have the means to do so. We then turn to the just, to get the most advantageous form of financing, the consolidation of future planned expenditures,

 - as a replacement for the classic situation of the loan (eg car loan), cheaper form of debt with a lower monthly fee, as to mobilize the necessary financial resources in the conduct of their own business - while banks are reluctant to lend money to entrepreneurs (and the application of highly complex procedures).

Who falls into the trap of debt and how to defend themselves?

 GROUP 1 Those who in the recent past have made the purchase of the apartment. The purchase of our M means to find it - usually through low interest mortgage. Sorry - in our calculations when buying - did not include all costs. For example, ran out of money at the door, basic furniture, household appliances and electronics, and all the good you can very easily be purchased via credit card or by purchasing in installments directly to the store and it's 15 minutes. And even though the individual purchases increase our monthly charge to a limited extent (eg installment for TV is just $ 30), and the product is really attractive and it turns out soon that the sum of our fixed costs came dangerously close to the amount of income.

 What in this situation we do?

A) definitely slowed down in the store emotions and shopping plan before - starting at home with a pencil in his hand: are you sure you can afford the extra burden often already stretched budget
B) if the happy buying an apartment, we need to estimate the additional costs associated with it - and we do not have the means to do so - let's try to apply for an additional mortgage (residential or - Consolidation: depending on what permit procedures in the bank, in which we have already taken out a loan to buy a home) on the total, as required in this case amount. But let's do it before you make specific purchases (in store, in installments), then significantly limit the cost of credit - we do not pay twice bank commissions and fees for early repayment. This form of debt is called a bank loan is often a mortgage loan

GROUP 2 Young people, reaching a high income. This is a very popular group of customers by banks - hence the easiness in obtaining further, gold credit cards (ie, with a limit of $ 10 000 and above), high overdraft limits in personal accounts or - cash loans. On the other hand - a decisive attitude of younger (though adult) generation to consumption - results in overestimation of their financial capacity, and often significantly towed in the fun on the loan.



 What in this situation we do?

As soon as possible - really grow up and look realistically at your current financial situation. Recommendation: as soon as possible to go to a specialist after the consolidation loan and the successful conversion of debt to start a new life ... no credit cards.

GROUP 3 Businesses. I think every entrepreneur passed liquidity problems. In critical situations, you need to save your company and face - certain payments, we can not put off for later (eg compensation of employees). Then goes back to the most expensive, simple forms to get a loan from a bank, or sometimes even more expensive - private loans.

What in this situation we do?
 
For sure - cool balance of profitability of the business. Is this temporary downturn or - a real threat unprofitable business in the long term. In the first case: definitely worth a look for the consolidation of debt (and also the draw of "emergency" for another crisis), the second - to try to reduce hard costs or ... END say. I do something else rather than trudge on in more and more debt and outstanding liabilities.