Important Of Credit Rating For Your Financial Health
This information is all about understanding the importance of finance, credit rating and your ‘financial’ reputation in general. To make the best use of creditors and lenders’ generosity, it is important to understand the purpose of improving your credit rating and therefore your credit score. Building a reputation in the financial industry takes a lot of time and effort, but destroying it is a matter of a week’s worth of mismanagement and carelessness. Missing payments, not paying bills on time, defaulting on loans and allowing any type of account to be turned over to a collection agency will cause disaster to your financial health. There is no immediate solution to these missteps. However, with proper planning and courtesy of your creditors and lenders, things can move forward in the right direction.
Many financial moves are good for your short term needs. For example, improving credit score by double digits can increase your chance of obtaining a loan, be it for business, house or education. Utilizing available credit wisely will lead to an invitation for additional credits from lenders like auto loans Richland SC. However, some financial decisions are bad for your long term financial growth. For example, there is a common misconception that filing a bankruptcy will lead to complete solution of financial woes. The truth is, bankruptcy is the absolute worse thing to do in terms of credit rating and credit report.
If your credit score has not taken a toll, when bankruptcy is filed, you will notice that it has dropped to a significant level. The late payments may not have done this; even the missed payments, defaults and charge-offs may not have impacted your score. However, bankruptcy will do that in a matter of a week of filing. Not only that, this move will continue to plague your credit rating and financial situation for the next ten years. The creditors and lenders will keep themselves away from you and any chances of getting a loan approved for personal or business reasons will disappear.
In essence, in almost all cases, bankruptcy is not a quick fix for financial problems. Instead, you are setting yourself up for a disaster that is hard to come out of. It will take years to build the lost credit, hence the lost trust with creditors and lenders. Furthermore, bankruptcy will not remove all of your debts. Some of the debts will continue to accrue, and banks and financial institutions will continue to reject your future loan applications. Rebuilding a credit rating, if it is in your mind, will take a considerable amount of time. And if you were able to rebuild it at all, finding the right lender who is willing to loan money may be a Herculean task. However, not all is lost. You can still put up a brave face and try reestablishing the credit score, by utilizing secured loan. This is the kind of loan that typically comes with very high interest rates and fees. Additionally, it comes with very low credit limits.