Money

Your Credit: An Asset or Liability?

Have you ever realized the importance of your intellectual property asset? You know what we’re talking about: your credit history profile! We all have (or ought to have) one!

On every (credit) account you opened, from a retail shopping card, mobile phone account, broadband internet account, car loan, to your bank credit card, you gave the authorization to the respective companies to send in your information to the credit reporting bureaus.

Obviously, you really want those bureaus to get your financial behavior information so you can build a decent (positive) credit history! Then again, forgetting to pay a couple of bills on time or skipping a car payment will negatively affect this history. Your asset can turn into a liability!

Perhaps not too many people are aware of the impact of their credit history (and associated credit score) to other areas than just the interest rate on their bank loans. Having a good credit history might make the difference between moving into that new apartment or being told you’re not creditworthy enough, or getting that new job or being told you’re too unreliable. Plus insurances on all sorts of items (car, house etc) might be affected as well!

And how do these companies really use your credit history to assess whether or not you are worth it? By using predictive model software and importing your credit history, they will be able to forecast how you’ll likely behave going forward regarding financial matters. This forecast is most of the time expressed in one figure: your credit score.

One’s credit score is derived from the following categories:

  1. Payment history accounts for 35% of the total score;
  2. Amounts owed account for 30%;
  3. Length of credit history adds 15%;
  4. New credit is another 10%;
  5. Type of credit used uses another 10%.

Normally these scores translate your credit history in a range between 300 and 800. Ideally, you’ll find yourself between 600 and 800.

This is exactly why one ought to really spend some time reading up on their credit score and seeing how they can improve theirs. It can save some of us quite a lot of trouble! Keep up-to-date with your credit history! Add it to your annual list of things to do.

Sometimes you can find mistakes or abuse on your credit profile, which you know nothing about. Exactly why if you keep tracks of your credit history, you can detect such mistakes early on before you pay dearly at the next credit control by your new landlord! These mistakes can be corrected but need to be addressed early on or they’ll affect your scores in months to come.

We all have our weaker moments – most of us point to ourselves when we were young and stupid – but late payments or no payments at all can hurt your credit history and only time and hard work will offset those mistakes on your record.

Please, don’t wait any longer and go check-up on your credit report. It truly is one of your intellectual property assets! Every (financial) move you have ever made and will ever make, will be viewable!

Having read this article now, maybe we ought to challenge you and ask you if you are currently aware of what your so-called FICO credit score is? Do you know whether your credit is an asset or liability?

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