It's a wise move to sit down with your banker or loan officer. Why is this a good idea for you? When you learn how these finance folks think, you will have a serious edge when it comes to getting credit. Here are some tips to make the most of the thinking process of creditors.
When you can put yourself in the lender's chair, you will develop the tactics that will make you look like a good credit risk. Thinking like a lender will help you understand how you must smartly handle your personal finances.
1. You need to become smarter about the value of credit.
Loan officers see credit as a tool for making profit for the bank through charging interest on credit. In a similar way, you need to understand how much each dollar of debt really costs you by relating the cost to how much you have to earn to cover those costs. In other words, what does credit really cost you?
For example: Say you earn $10 an hour on your job and your monthly debt interest is $50. This represents 5 hours of work at your job every month just for the right to buy things on credit. It can get expensive to have debt. What is your labor worth compared to what you buy on credit?
2. How lenders determine your real credit score.
Creditors just use your score as a starting point. They go much deeper into your credit history to calculate their chances of making money from you paying your debt to them. One of the biggest factors is how your income matches your debt load. Do you earn enough money to cover a new debt?
Of course they look at the usual factors like late payments, bankruptcy, too many accounts, etc. but they are more concerned with your verifiable income.
3. Clean your history of unused accounts or closed accounts.
Go through your credit reports from all the major bureaus and make sure that accounts you closed are really closed. Sometimes these things get missed. You want to be sure they are off your history. Lenders see too many accounts as a bad thing.
4. Stop being a nomad when it comes to your residence.
Pitch your tent for as long as possible at your current residence. Your history shows where you have lived. Lenders like long-term addresses because it shows you have control of your ability to pay rent or pay a mortgage. They love stable borrowers.
5. Don't be a job jumper.
Frequent job changes is not always negative, especially when it involves a promotion and greater income, but, changing jobs for the sake of change is a bad thing. Your credit history does not give the details so you may have to explain the job changes to prospective lenders. This is another good reason to have lunch with your friendly neighborhood banker.
6. Grab a deal when it makes sense to your bottom line.
The big thing with credit card companies and some banks is to offer "points" if you grab their special offer and switch to their institution. This, too, can be a bad thing unless you can gain some financial benefit for your bottom line.
Getting just "points" is not usually enough whereby cutting your interest rate would be a good thing. If offered a 0-percent card and a lower interest rate, grab it. It shows lenders that you are a smart borrower and will make them compete for your business to keep it. Do this whenever the opportunity arises and it will save you thousands of dollars in interest payments.
At the beginning of this article is the advice to have lunch with your lender. One cannot put a price on relationships. They can be very valuable and having a strong relationship with one bank and one lender will serve you well when you need credit. It's much easier to get some understanding from a "friend" than to deal with a banker who doesn't know you personally and goes by-the-book.
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Fix Your Credit Report. Jim DeSantis, Editor.
