Managing Debts and Building your Credit Rating

When it’s your first time working and receiving a salary getting a car loan approved on your first year is almost impossible. Financial institutions who releases and scrutinizes loan applications will have to check your capacity to pay and your credit rating. Low credit rating or no credit history at all will present a risk for losses to the financial institution. Since you are still starting it is important to ensure that you make financial decisions that will positively impact your credit rating. A good credit rating will help make things easy for you in the long run and later in your adult career.

The moment that you get out of college and step into the real world by getting a job your responsibility to build your name and financial wellness score begins. The rating may only look at your history of saving up in your bank account or how well you pay for your phone bills but there are many underlying factors that go with it. The small things that affect your credit rating could go as specific as the extra dollar that you spent on a cup of coffee or the couple of bucks you took from your allotted savings to buy something that was on sale. These tiny unplanned purchases can impact the financial numbers that gets to your bank accounts or that goes to the payment of your bills.

It is important to note that the only way to avoid being buried in debt is to spend only what you have and only what you can. Never spend money that you do not have yet. Some people would opt to loan money to buy something thinking that they’re paycheck is just a week away. When the pay comes it gets paid to the loan and you now come to realize that you are lacking the resources for the other items on your necessity list. This is when the chain of loans begins to roll. Some people burry themselves with payday loans over loan shark debts and bank loans. Paying up your debt with another debt does not solve the problem.

Financial management and building your credit rating begins with managing your finances up to the tiniest detail. Though financial companies do not get into the details of your spending patterns this can be reflected with your debt and loan history. They will know that you  are managing your finances pretty badly because you’ve had over half a dozen payday loans in the past year. Things like these can hurt your credit rating and may even prevent you from getting a credit card or being approved for housing or car loan.

Building your credit rating is important. The more important thing is to remember that the credit rating is only a reflection of how well you manage your finances. Only spend what you have and never consider future income as fluid funds because it may give you the false confidence to make purchases that you really cannot afford now or in the future.

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