Think Like a Lender

If you think like a lender, you can see which habits and traits you need to develop in order to be considered a good credit risk.  Thinking like a lender will help you understand how you must manage your money to be appealing to lenders.  There are few tips that can put you into the right mind set:

Tip #52: Know how money works.

Reading books about money and understanding how your accounts and loans work can go a long way towards helping you keep your credit in good repair.  For example, if you know that some loans will charge you extra if you pay off your loan faster while others will not, you will be in a  batter position to make financial decisions.

Plus, the more you know about money in general, the more comfortable you will feel with it and the better decisions you will be able to make, which will help improve your overall financial state and will help you keep your credit in good shape.

You don’t need to do heavy-duty research to appreciate how money works.  One easy way to consider money is to think of it the way you think of time.  You likely hate to waste time and you want to make the best use of it possible.  Apply the same attitudes to your financial life and watch your finances soar!

If overspending has caused you to have a bad credit score, consider the following sneaky mind set trick: equate your money with your time.  For example, if you make twenty dollars an hour, then a magazine subscription of $20 will represent one hour of your work.

Imagine an hour of your work and ask yourself whether the subscription is worth the time you put into the twenty dollars.  Once you start seeing money as something that comes from your hard work rather than a general “thing” impulse spending will seem much less attractive, and it will be easier to keep your credit card limits low and you bank account stocked up with cash!

Tip #53: Take care of those things besides a credit score that affect how lenders view you.

Lenders will often look at not only your credit score but at other financial indicators, such as your income, employment record, and savings.  Keeping these things in order can complement your credit score and can help you get good overall credit. Some lenders have their own ways of calculating credit scores, so keeping your overall financial system in good shape is one way to ensure that you are in good shape in all lenders’ eyes.

Be aware that when lender ask to see your credit score, the credit bureaus send not only your credit score, but also the top four reasons why your credit score is lowered.  The most common reasons for lowered credit scores are:

1) Serious delinquency in repaying accounts or bills.
2) Public record of bankruptcy, civil judgment, or report to a collection agency
3) Recent unpaid or late paid debts or accounts
4) Short-term credit record
5) Lots of new accounts
6) Many accounts have late payments, defaults, or non-payments
7) Large debts or amounts owed.

Knowing that your lender sees these possible problems can help you see the need to develop the best possible face to present to a lender.  Lenders who look at your entire credit report may get a more positive picture of you than lenders who see only a number and four reasons for a lower score.

Tip #54: Follow up on closed accounts.

You closed a store card years ago – but is it still listed as an open account?  Bureaucratic mix-ups happen, often quite frequently.  If you want to keep your credit score good, you need to follow up on financial details.

Whenever you close an account – whether it’s a credit account, bank account, or utility company account, make sure that you get written confirmation that the account is closed and paid in full and then follow up a few months later with the company to confirm the closed account.  This simple precaution can save you hours of frustration – not to mention a lowered credit score.

Tip #55: Don’t move around a lot.

Lenders like to see stability – it suggests stability in financial matters as well as in your life, and makes you a better credit risk.  Plus, every time you move, you may have to change your credit information – including switching banks.  This actually negatively affects your credit score by not allowing you to develop long-term relationships with lenders.

Remember: Your current and past addresses are listed on your credit report even if they do not directly affect your credit score.  Any lender looking at your full credit report will be pleased to see that you create a stable life for yourself.  Not moving too frequently can also save you money on moving costs, which can add up quite quickly.

Tip #56: Don’t change jobs frequently.

Of course, there will be times when you will have to change jobs.  However, avoiding changing jobs unnecessarily will help improve your credit score by allowing you to stay in one place and build a steady financial situation.

Your credit report also shows your current and past jobs – if a lender sees that you change jobs frequently, he or she may wonder whether you have the life stability required to handle debt responsibilities.  Also, the lender cannot see why you left a job.  If there are many employers listed on your credit report, the lender may wonder whether you have not been fired from jobs and whether that is an indication that you will be unable to pay your debts due to unemployment at some point in the future.
A lender makes their money by the interest charged on a loan.  If you default on a loan, you cause the lender to lose money.  Above all, the lender wants to see evidence in your credit record that you have the traits that will make you repay the loan – with interest.

Frequent job changes may indicate – to some lenders – that you will simply disappear with the money or default on a loan. Having a stable life – including a longer-term job and one place of residence – may indicate to lenders, on the other hand, that you are building up roots in a place and so will be unlikely to move and default.

Tip #57: Avoid changing switching credit companies and credit accounts a lot.

Credit companies will often offer you special introductory rates, generous free gifts or other incentives to switch companies.  However, you should resist the temptation unless you have a reasonable reason to switch. Establishing a good credit relationship with one company – having one credit card from your college days, for example – is a good way to show lenders that you are a steady sort of person who is likely to take money matters seriously.  That is exactly what lenders want to see. Switching accounts and lenders makes you appear fickle and less than reliable.

Tip #58: Keep your records up to date.

Not knowing what is going on in your own financial life is courting disaster.  Keep one file folder in your home which contains your financial information – and review this periodically.  If something changes in your life – you get married, you start a family, you move or change jobs, look through your financial folder and contact everyone who needs to be contacted to update them on the change.  This will help make sure that all your creditors have the information they need about you. Keeping your own records up to date will help you make sure that everyone who handles your finances is also up-to-date.

Tip #59: Always be sure that your creditors know your current address.

If you move and forget to inform all your creditors of your new address, you may not get all your bills, making you look like a deadbeat debtor and making your credit score plummet.  Make sure that you either close your credit accounts or get your new address and contact information to your creditors.

When you move, make sure that you inform credit card companies, stores you have credit cards with, banks, credit unions, and anyone else you do financial business with.  Better yet, also arrange with the post office to have your mail automatically forwarded to you at your new address. This will ensure that any creditors you may have overlooked will still be able to contact you – and you will have a second chance to remind them of your address change.

Tip #60: Talk to lenders and creditors.

Many people are hesitant to keep an open line of communication with their lenders because they are embarrassed about their financial state or because they feel unsure about the position.

Lenders can’t read your mind, though.  They do not know that you can’t make a payment this month but will be able to make a double payment next month because of a banking error. They simply see that you have failed to make a payment – this may indicate a temporary problem or a decision on your part to default on your loan.
Without your input, your creditors have no way of knowing, and since their profits and money are at risk, they tend to take the more conservative view and even assume the worst. Keeping the lines of communication open as soon as a problem develops can help reassure your lenders and can help your creditors see that you are responsible with their money.

Talking to lenders as soon as a problem develops can be an effective way to prevent a ding on your credit score that can affect your credit score.  For example, if you are giving trouble paying your bills, you can often work out a more reasonable payment schedule.

In most cases, you will not get a ding on your credit record if you do this because the lender will have some assurance that your financial obligations will still be met.  In fact, one of the things that most credit repair companies do is to arrange for more reasonable payment schedules.  With a simple phone call, you can do this for yourself for no charge.

Lenders want, above all, to be repaid so that their interest rates can earn them a profit.  By communicating whenever there is a problem and showing that you are willing to work hard to meet your responsibilities, you show your creditors that they will get their money and this makes lenders more willing to work with you to ensure that your credit rating is not badly affected by one missed or late payment. Speaking with your creditors can help establish a good working relationship that can help keep your credit rating in good shape.

Tip #61: Get lenders to waive late fees and charges.

If you have missed some payments or made some late payments, lenders will often charge you a fee for non-payment.  This not only adds insult to injury – you have to pay more on your bills and get a ding on your credit – but also makes bills more difficult to repay since the bills are now higher.  You can phone the lender and get the charge waived in most cases, though.  This is a secret that credit repair companies have long known and is one of the first services they will perform on your behalf.  You can easily accomplish this for yourself, however, at no cost.

Lenders want to get paid, and if they think that you will pay your bill more quickly by waiving the late fee, they will most often gladly remove the fee in exchange for prompt payment.