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- Financial Planning
How to establish a strong financial background
Just think about when you are about to apply for a loan, a mortgage or even to get a credit card, is there any difference between a person heavily in debts plus a rather unstable financial capability and a person with a high credit score and strong annual income? The lenders/issuers will provide a far more relaxed terms and policies to the trustworthy person after his/her credit history and credit score. Needless to say, if they see too many dark spots and large debts, you can expect the conditions for the loans will be harsh and unforgiving.
So if you intend to seek out or probably acquire some financial supports in the future, you may want to make your credit history a bit credible from today. Some suggestions below prove to be helpful in your process.
- 1. Basics: Bills, incomes and housing
You can start building a good financial reputation by paying your bills timely and possessing a stable income. Utility bills payments are some of the foremost proofs required by financial institutions. If you are a late payer then your first impression to them will not be positive. A steady flow of income will also reassure them to provide better terms and polices according to the amount you earn annually. Your housing history should be stable unless job-related tasks made you move around a lot. In general, make sure you don’t present yourself as a risky investment to the issuers/lenders: Too many failed payments, loans and debts never let you have access to financial assistance.
- 2. Improving your scores
Credit score is an important figure that every financial institution seeks out before making any decisions. If the score is sufficiently high then you are half way through the process. So how to raise the number? There are certain small actions that will steadily raise your number considerably after a relatively short time.
Open a saving account: This show the issuers/lenders that you are a prudent person with high responsibility for your money. Deposit money in there regularly will reinforce your chance of attaining your goal. Do remember not to open too many accounts because that possibly makes your lenders become suspicious about your purpose.
Debts: Keep you debts at low level and pay them off as soon as possible. A person with heaps of debts and overdue loans in no way can have a good appeal in the eyes of issuers/lenders.
Purchases: If you already have a credit card then just make small yet regular purchases. Your credit card debt balance should be low and solved fast.
- 3. Financial actions
Your budget: Always carefully plan your budget ahead of time and do your best to stick to it. A portion of your income should also be set aside for “emergency situation” or long term saving. These steps shall assist you in supervising your income and expenses better and creating a fairly positive sustainable balance of income/outcome plus a contingency fund for unexpected events.
A nice flow of money: It’s good if you have a good annual income but do remember that your outcome should always be kept at equal or lower level. Dramatic purchases of property or service taking a large portion of your primary income in a certain period of time with no careful planning are strongly recommended against. The correct course of action is to use your long term saving in a proper way so that you are still able to cover your usual expenses in that particular time frame and don’t have to run into any late payments. The same way is also applied to sudden and unexpected spending such as medical and automobile repairs.