You might not be aware of it, but there is such a thing as a credit score. Just like how the success of your Facebook posts can be gauged by the reactions of your followers, credit scores are indicative of your performance when it comes to repayment of loans and debts.
While the number of your followers and level of engagement shape your social media standing, lenders look to your credit score to determine if they should lend you money, or allow you to take out loans so that you can afford the things you need. These can range from items such as gadgets and appliances, to bigger investments such as cars and houses.
In the Philippines, the Credit Information Corporation (CIC), a government-owned and-controlled corporation, helps financial lenders secure reliable information on potential clients’ credit usage and previous payment activities. This is how lenders consider your capability to fulfill loan agreements and adhere to payment schedules.
This said, your credit score affects your chances of getting a much-needed loan approved, or whether or not you can get that smartphone you’ve been dreaming of on installment. The worst thing you want to have is a bad record, and here is what you should avoid if you want to keep an excellent credit score:
- Spending beyond what you can afford. Define your needs and wants, and only purchase the things you can afford. Also, evaluate your cash flow and only take out loans that you are confident you can repay.
- Missing Your Payment Due Dates. Plan and set your priorities, as your credit score drops every time you miss a payment deadline. Remember that the later you pay, the worse your score can get. If you can’t help it, it might help to reach out to the lender and strike a compromise.
- Accumulating debts. Make sure you always keep track of the loans you have and your agreed payment terms. Keep your debts low and within your spending capacity, because doing otherwise gives the impression that you cannot manage your finances properly.
- Being inconsistent with your payments. Payments should be made on time on a regular basis to show that you are responsible and trustworthy. Consistency is key. Sometimes paying on time and sometimes missing the deadline is not good for your credit score.
- Running away from bills and debts. Always accommodate calls, emails and other forms of communication from your lender. Ignoring these would also result to a bad credit rating as this can be taken as a sign of delinquency on your end.
- Defaulting on loans. Always keep your end of the bargain, because defaulting a loan shows that you are not capable of fulfilling your responsibilities under the loan contract.
It is never too early to start building your credit history. If you are a first-time borrower, Home Credit, which provides non-bank loans on affordable installments, might be an ideal option in starting your credit history. The requirements for these gadget and small appliance loans via Home Credit are minimal, and the application process is not as difficult as other similar services. The company also has a system in place that helps determine the payment schemes that match your monthly capacity and remind you of deadlines that can aid in managing your finances properly.
The longer your credit history, the better for your credit score. So even if you think you don’t need it now, consider building and maintaining a good credit score as early as possible and make sure you remember these tips to keep your records excellent. You’ll never know when you might need to take out a loan.