How To Build Good Credit
Credit comes with pitfalls. We are told this regularly and for many people it seems to be all they ever hear about the process of paying with credit. However, if managed to your advantage, you can make credit cards work for you. Bear in mind that banks and lenders are quick to add charges to accounts when they feel that there is an opportunity to do so – and don’t give them the chance to do it. Do you believe that it costs them that much to administer to your late payment? Of course not – so make sure you are in the driving seat.
To do this, it is a matter of using credit in ways that the bank won’t recommend. The “monthly” payment on your credit card will usually be set at a small percentage of the balance, and the bank will be happy for you to only ever pay that, because you will pay off more than you ever borrow. Interest, plus any charges, will amount to as much money as you borrowed in the first place. However, you can pay more than the monthly payment, so here is how to make it work for you.
When you take out a credit card, use it as you would use an ATM or debit card. Pay for groceries with it when you get your wages at the end of the month, and then instantly pay the balance off in full. For a while, live off credit and use the money that goes into these costs to make payments to your card. Your credit rating will soar. Your bank will offer you better terms. You’ll be in the driving seat.
Living Debt Free
There is an increasingly widely held impression in society today that in order to get by, you have to get into debt at some time or another. This is actually untrue, but because for many people the alternative seems to be a fairly boring life, they feel that it may as well be the case. However, it is possible to live life debt free if you follow some rules and bear in mind that, eventually, you will find a way to make the best of it and actually enjoy your life. Knowing that you can live a life without debt collectors writing, calling and even knocking on your door really makes a difference.
It will require you to make and stick to a budget. This may sound dull, but when you think about the alternatives – debt collectors generally do not tend to be particularly courteous people – it is something worth doing. When you have money paid to you at the end of the month, write down what you will need to spend. Food, rent or mortgage payments, transport and general housekeeping, as well as bills for electricity, telephone and other necessities – these are essential outgoings.
What you have left over is disposable income.
By doing this monthly you will before long arrive at a point where you know automatically how much money you have. Treating yourself or others need not be a thing of the past. Indeed, without monthly credit repayments to meet, you will have more scope to do this. It is a more serene way to live.
Your Credit File And What It All Means
Credit card companies and other lenders live by their own Bible, and that bible is the credit file. It is this file that they consult when you apply for a loan or a card, and it is to this file that your own conduct of your accounts will be referred, whether you make balance payments, minimum payments, short payments or no payments at all to your credit card. The way you conduct your accounts will be of great interest to these companies, and will usually decide whether or not you get further credit, and how much you get. The credit file is a source of much speculation from individuals, but in actual fact it is something that you can see for a small charge.
It is a little-known fact that things sometimes find their way onto a credit file that should not be there. Banking errors can result in a missed payment being registered when in actual fact the payment was met. If you keep your statements (and you should, or at least keep track of your banking online), then you will know when payments were made and whether any were missed. In cases where the information does not tally up, you are well within your rights to complain to the bank and request correction (and in some cases, compensation). Register online: http://www.vedaadvantage.com/ the major credit agency for the chance to see your credit files, and make sure you aren’t being misled. It happens – don’t let it happen to you.
Find Out Where You Stand
There are many people out there who have been denied credit on the basis of a poor credit rating and have thus been unable to get a mortgage, buy a house or even, in some cases, pay for medical treatment. The reason for their poor credit rating may be that they have run their accounts badly in the past. Alternatively, they may well have run things impeccably, yet it still happens all too often that despite their good conduct they will be denied credit. There are varying reasons for this, some of which are quite shocking.
In a number of cases, people have been denied credit because of the address at which they live. Unknown to them, a past resident may have run up huge bills and fled, causing not only a slew of final reminders and other such threatening letters to turn up in the mailbox, but also black marks to go against that address when it comes to credit searches. Because of a lack of transparency, you may never find out about this, but it could be what is stopping you getting credit.
Additionally, the practice of identity theft, although a major priority for lenders and law enforcement alike, can often pass undetected – fraudsters may be immoral but they are not stupid. Someone could be using your name and your details to run up huge balances they have no intention of paying off. Again it is you who will suffer, in the form of your credit rating being decimated – but if you check your credit record regularly you can catch them out.
Using Credit Wisely
Credit cards are blamed for a lot of the debt problems suffered by a significant section of our society. In some cases, there is justification for this state of affairs, particularly as banks have been caught more than a few times using unethical practices to sell credit cards to people who did not need them, did not know how credit worked and who were ill-equipped to ever use them. This kind of practice is all to easily understood, because banks will pay commission every time one of their staff sells a credit card to a customer. All that is needed is a few lies of omission – not illegal, after all – and a blasé attitude to explaining the process of obtaining credit, and you have a happy, but unaware, customer.
It may sound bizarre, but credit card companies are often perfectly happy to let people miss payments on their card. It has been remarked upon that statements often fail to arrive at the customer’s home – frequently because they were never sent – and with the payment missed, the bank adds a late payment fee to the card’s balance. If this takes you over your credit limit, you may well get an over-limit fee as well. Now that most banks have been required to take their systems online and let customers see their statements one way or the other, you can always be one step ahead. This will enable you to stay on top of your accounts and out of the red consistently.
What They Will Tell You To Make You Pay
It seems bizarre that in this day and age, companies will use processes that verge on the illegal (and often stretch all the way into immorality) to make customers pay their credit accounts. This may seem like a scare story, but it is actually completely true, and in fact the scare story habit is one that can more accurately be attributed to the credit companies themselves. Scare stories are just one way in which credit card lenders will make people pay up on their credit accounts – even if they need to work themselves into an early grave or a hospital to do so.
The action from collections agencies will usually begin with letters taking a fairly light tone, advising you that you have missed your payment and that unfortunately, unavoidably, they have had to apply a late payment fee to the account. However, even if you then make your payment, the next step should you miss another will be to send a letter telling you that your conduct of the account is unacceptable. Often it will go on to say that “continued poor conduct” may see you lose your house, car and other things which are dear to you. It is threatening conduct, no matter how officially phrased.
The truth of the matter is that, for all their threats, a company will not be entitled under the law to take your house or your car off you unless the debt was secured on these items. As long as you show willing to deal with your account, such conduct is outside the law. The companies are banking on you not knowing that.
The Light At The End Of The Tunnel
Being in debt can be a genuinely awful situation for anyone. Anyone who has spent much time speaking with people in debt, or who has been in the situation themselves, will be familiar with descriptions like “the phone rang and I jumped”, “the doorbell went and I hid” and other, sometimes quite chilling descriptions of the depression caused by being in large-scale debt. People have ended up committing suicide to escape the frustration and the misery caused by being unable to escape the situation they are in. debt, make no mistake, can be a horrendous situation to be in.
The good news is that no matter how heavy the debt you are in, as long as you demonstrate an intention to get back on track there is a way back to the land of the living, financially and emotionally speaking. However bad things may happen, there are debt solutions and organizations looking to help you, aware that the banking industry often goes too far and ready to play a part in helping you break the chains.
It is essential to retain a belief that things will get better, because on the balance of things you haven’t killed anyone, attacked anyone or actively stolen anything. Taking out a credit card in good faith, and then being unable to meet payments on it does not make you a bad person and it should not make you feel like there is no way you can carry on. By keeping your head up you can battle on and improve your situation. Take the help that is there.
Shared with you by – Maureen Millar
Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4212)
Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“
