Many people do not realize that they have credit problems until they receive credit card reports and realize that they cannot take a property or car loan. A bad credit makes a lifetime of financial inability to grow and expand in terms of getting funds from lenders or partners. Critically analyzing credit reports and avoiding certain mistakes as explained below will help in a successful financial independence that everyone in the world is working hard to achieve.
Spending Beyond Your Income
People who use credit cards normally ignore the simple fact that a person is not supposed to spend more than the limit. This means loan lenders will be checking out the credit to debt ratio. Spending should be around 20% of that specified limit which should not be exceeded.
Removing Inaccurate Accounts
There have been cases where customers have always removed an inaccurate account that occurred due to unpaid debts. Paying debt is one of the most important things to a lender and a case where a debt collector has been sent across different states to track down a potential loan borrower is not a good portrait. A potential borrower should pay all debts before making an agreement to repay extra loan.
Overlooking Debt Collection Agencies
It has been the work of debt collection agencies to find customers and advise them to pay the money they owe. By law, a borrower has 30 days to agree to the commands or dispute them. This should not be ignored by any borrower in case a debt collector has presented valid papers stating that certain amount of money is owed to a certain lender. Lenders do not like borrowers who will disappear after taking a loan and this is the sole reason why it is very important not to ignore collecting agencies.
Closure Of Old Accounts
Borrowers like to impress their lenders and it is only normal to close old accounts. This act will not be very favorable when you show your lenders that you have credit for only a few months. Lenders need to know that you have experience in paying debt. Old credit cards and accounts are the best proof for a loan because lenders will analyze how you paid the other debts you owed in the past.
Stop Account Payments
This has been done by very many people in the current society where a person takes a credit card than stops depositing money on the account. This will lead to closure of the account and then a debt collector will be sent to a borrower’s resident or work place. This means two bad accounts are created in your name: charged off and collection account. Lenders will not want to give any loan when this happens.
Having Many or Few Credit Cards
People who believe that having just one credit card is a way to show that they can wise on their spending is not what lenders are financing. Lenders need to know that a borrower can handle 3 to 5 lines of credit at the same time and also have installment account. This does not mean that a person should go for very many credit lines because it will be difficult to repay all the money owed at the same time.
Avoiding Credit Repair
Credit repair for many people happens just once while some people fail to notice they have credit report problems. This is a continuous process because it requires the borrower to always be alert on the amount of money spent and how repayment can be made in case there is a problem. Increasing a credit score does not occur overnight but through a continuous responsible hard work.
It is without doubt that a lender will not give loan to a person that is on and off on finances. This means that you need to maintain a stable income to get one of these amazing credit lines from good lenders. Employment in a stable company also increases your credit score because lenders need to be assured that their money will be repaid through lasting financial relationships with a client.