Maintaining good credit Flashcards
ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.
the ability to borrow money or access goods and services with the understanding that you’ll pay later. Car loans, Mortgages, Personal loans
Lines of credit
Credit
T Credit Acc
credit provides you with a lump-sum amount, which you’ll repay in regular installments over a fixed period. (mortgages, auto loans, student loans and personal loans)
Installment Credit
T Credit Acc
allows you to borrow up to a certain limit, pay it
back and borrow again.
(Credit cards, lines of credit)
Revolving credit
Impact of a Good Credit Report (3)
Better loan approval chances.
Lower interest rates
Increased trust from lenders, landlords, and even potential employers.
Improving Your Credit Report (3)
Pay your bills and loans on time.
Avoid overextending your credit limits.
Regularly review your credit report for errors.
a three-digit number that provides you and others with a snapshot of your overall credit health.
measures a borrower’s creditworthiness based on his or her past financial transactions. 300-850
credit score
the primary government body responsible for gathering and consolidating credit data in the Philippines.
Credit Information Corporation (CIC)
provide credit scores based on the data they receive from the CIC.
Private credit bureau
Factors that affect credit score
P - C - L - T - N
Payment history (35%)
Credit utilization (30%)
Length of Credit History (15%)
Types of Credit (10%)
New Credit Inquiries (10%)
Credit Score Ranges
Indicates high risk for lenders
300-579 poor
Credit Score Ranges
Average credit score
580-669 Fair
Credit Score Ranges
good creditworthiness, and borrowers in this range are more likely to receive loan approvals with reasonable interest rates.
670 – 739 Good
Credit Score Ranges
have a strong credit history and will
generally receive loan approvals with lower interest rates and better terms.
740 – 799 Very Good
Credit Score Ranges
exceptional creditworthiness,
800 - 850 Excellent
how to check your credit score
TransUnion Philippines:
CIBI Information, Inc.:
CRIF Philippines:
Strategies for Building Good Credit
Pay all bills on time.
Keep credit utilization below 30%.
Build and maintain a long credit history.
Make Payments on Time
Keep Credit Utilization Low
Establish a Credit History Early
Diversify Your Credit Mix
Limit New Credit Applications
Diversify Your Credit Mix
Monitor Your Credit Regularly
Dispute Inaccuracies
Use Credit Cards Wisely
Become an Authorized User
Pay Off Debt Strategically
Maintain Open Credit Accounts
Avoid Maxing Out Credit Cards
Focus on paying off the debt with the highest interest rate first, while making minimum payments on other
debts.
Avalanche method
Debt Management
Rank your debts from smallest to largest balance.
Snowball method
Combine multiple debts into a single
loan with a lower interest rate or more favorable terms.
Consolidate Your Debts
Contact creditors to negotiate lower interest rates, reduced payments, or extended repayment terms.
Negotiate with creditors
Find a Card with a Low Introductory Rate: Look for cards offering
0% interest for an introductory period.
Transfer Your Balance: Move your high-interest debt to the new
card.
Use Balance transfer credit card
Part-Time Jobs: Consider taking on additional work during
evenings or weekends.
Freelancing: Use your skills to find freelance opportunities online.
Sell Unused Items: Declutter your home and sell items you no
longer need.
Increase income
Non-Profit Organizations: Look for reputable non-profit
agencies that offer free or low-cost services.
Debt Management Plans: They can help you create a plan to
pay off your debts over time.
Seek professional help
Taking on new debt while trying to pay off existing
obligations can make it harder to achieve debt freedom and
increase financial strain.
Avoid accumulating new debt
Aim to save a small amount regularly, even if it’s just a few pesos.
Set Up an Emergency Fund
Use unexpected sources of income, such as tax refunds, bonuses, or gifts, to make extra payments on your debt.
Use Windfalls to Pay Off Debt
Break your debt repayment goals into smaller, achievable milestones.
Stay Motivated
legal process that can discharge
or restructure debts when an individual is unable to repay them.
Seek Bankruptcy as a Final Option
Debt settlement involves negotiating with creditors to settle your debt for less than the full amount owed, usually in a lump-sum payment.
Explore Debt Settlement (Last Resort)
