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How a credit rating improves your life
A credit score is an important parameter for many people these days. This score will be essential for career mobility for anyone today. Many people are interested in learning about how to improve their credit score and maintain it in a good condition. This credit score is used by banks and any other financial institutions when they want to look at the capabilities of their clients.
You will never know the overall credit score when it is bank-related. Most banks will keep the score confidential. However, you can learn how you can improve your credit score based on the 5Cs of credit. There are 5 important parameters that you need to take a look, so you can maintain a good credit score in banks or financial institutions. Most banks are going to take a look at these parameters when they want to create a scoring system for their clients.
Capacity. Capacity is pretty self-explanatory. It is someone’s gross annual income and his ability to pay back the debt. In order to check this parameter, most banks are going to set up a minimum income requirement and also tenure for ensuring that all of their clients can meet up their requirements. Your total monthly payment should never exceed 30% of the total monthly gross income. For example, when your salary is P55,000, the monthly payment should never exceed P16,500. Some banks also have minimum salary requirements, for example, P30,000 – P40,000 every month.
Collateral. This is another important thing that you have to consider when you are planning to take a loan. Your collateral needs to be located in a strategic location, so your bank can increase the overall value of your collateral. This parameter will also involve legal impediments. The banks or financial institutions will ensure that there is no problem with the title.
Character. When you are going to submit a loan application, you will be checked for this parameter. The character will be your payment history. Do you have a lot of late payments or missed payments? All banks will report to the bank network. When you have any bad loan payment history, other banks may avoid giving loans to you. This is an important parameter that will be checked when you submit your loan application. It is recommended for you to maintain a good credit score by paying all of your loan payments on time.
Conditions. There are some internal and also external factors that we don’t have control over. Some examples of these conditions are war zones, economic, diplomatic crises, etc. When something bad occurs on the outside, most banks are not willing to take a high risk by giving you a loan. They will be likely to have difficulties when collecting the payment in the future. Before you submit your loan application, you need to ensure that everything around you is in a good condition for improving the chance of getting your loan accepted.
Capital. Most banks will also take a look at this parameter when giving a score to their clients. It will be how much money you are ready to pay out for the loan. When you can prepare up to 50% for the down payment, you will be considered as someone with better spending power and also more stable financially compared to the other people who only have 10% as the down payment.
Before you submit your loan application, you need to analyze your condition and all terms and conditions from the bank. You need to ensure that you can pass all of the requirements from the banks or financial institutions. Don’t forget to ensure that you don’t have any negative files or records on the banks, so you can increase the chance of getting your loan approved.
Sean Martin D. Plantado, a finance specialist at Digido.ph advises you to learn to take responsibility for your finances. Don’t take money you can’t pay. If you get a loan or get approved for a loan or credit card, make sure you pay the debt before the deadline.
You also need to have a financial check-up for ensuring that you can pay all of the loan payments on time. When you are ready to pay off the loan, you can consider doing so. You may be charged for the advanced payment fee, but this fee will be much cheaper than the interest rate. Please be sure that you can pay all loans with high-interest rates, for example, credit cards or payday loans.