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Sunday, January 8, 2023

Wise Tips for Using a Credit Card So that Credit Scores are Always Safe

Understanding how to use a credit card is not something that is taboo. Especially considering that the function of a credit card can actually smooth your financial or business circulation if done wisely.

The initial concept of the credit card itself is actually to provide the money needed by the borrower to achieve a financial goal.

It's just that it can't be denied, lately the use of credit cards has been more directed for consumptive purposes which makes a person entangled in devices and constantly in debt.

In fact, a credit card can actually be a financial savior. Just imagine, when you have lots of debit cards, but there are not enough contents, the needs you need are not fulfilled.

But when you have a credit card, you can get a short-term loan in a very short time without a complicated process.

Who would have thought that knowing how to use a credit card could increase your credit score. That way, you can more easily get a loan in the future with a ceiling that suits your needs.

Of course this can happen if you use your credit card wisely.

Get to Know What a Credit Card and Credit Score Are

Wise Tips for Using a Credit Card So that Credit Scores are Always Safe

Maybe you are a little less familiar with the term credit score. This is a calculation to describe the ability and eligibility of a borrower to repay debt.

Every bank or other financial institution often checks credit scores in advance to determine credit limits that can be submitted and approved.

Making payments with a credit card is actually also part of a short-term loan that makes you get a credit score.

This score will be useful in increasing credit limits for other loans in the future, such as for loans without collateral or for home ownership loans.

But be careful, your credit score can get really bad if you use a credit card without consideration.

Here's a wise way to use a credit card so that your credit score as a debtor remains safe and doesn't hinder other urgent loans in the future.

Set Credit Card Use Limits

It doesn't mean that because you have a credit card you are free to use it to buy all the things you want. However, using a credit card is synonymous with debt and you still have to pay for it all.

For that, start making limits on the use of credit cards. Get to know your financial capabilities first and set a nominal that can be tolerated by using the credit card.

Do not let you go too far using a credit card to the point where you become confused because there are no funds to pay for it when the bill is due.

Paying Bills on Time

The wise way to use a credit card is to always pay bills on time. Just like other types of credit, there are shadows of fines and interest that can happen to you if you don't pay your monthly bills on time.

When you are late paying credit card bills, the credit score that the Financial Services Authority has on your behalf will also deteriorate. You will be labeled as having a history of substandard payments and this could affect loan approvals at other financial institutions in the future.

Always Pay Off Bills

Another proper way to use a credit card is to always make payments in full when the bill arrives. It is not uncommon for cases where credit card borrowers only pay a minimum bill of 10 percent of the total bill each month.

When you are only able to pay 10 percent of the total bill, it means you are letting the interest on your debt get bigger.

The habit of paying minimum bills will also make you tend to make loans with a nominal value above your financial ability. The concept of “dig a hole, close a hole” is also very vulnerable to people who are used to making this minimum payment.

Avoid Cash Withdrawals

One of the features that you avoid when using a credit card is cash withdrawals. This feature allows you to take a certain amount of cash, thus making it easier for you to make various purchase transactions.

However, the cash withdrawal feature actually offers higher interest, which you have to pay every bill due date. Obviously this is not a wise way to use your credit card, it will burden you more and risk making you more anxious to get cash from debt.

Don't Have Many Credit Cards

Don't be proud when you have many credit cards. This is tantamount to indicating a more consumptive life risk and greater obligation to pay bills each month. If you want to be wise and maintain your credit score, it's better if you only rely on a maximum of two credit cards for various purposes.

Sunday, January 1, 2023

3 Ways to Overcome Bad Credit and its Understanding

Surely you are no stranger to using the credit system. The simple credit system is owed to other parties and the method of payment is made in installments over a certain period of time.

The credit system is usually used in large transactions such as purchasing property or borrowing business capital.

Despite needing it, debt is bound to weigh heavily on your mind. Especially if the nominal is large and it's hard to pay for it.

It is possible that the debt will then burden your balance sheet, accumulate, and never be paid off. You may be able to negotiate to increase the term of debt repayment if borrowing from individuals.

Ways to Overcome Bad Credit

However, of course the unpaid debt will be a problem if you borrow at the bank. The reason is because the interest paid is increasing and the nominal amount you have to pay is even higher.

The condition when a customer is no longer able to pay or repay a loan is called bad credit.

This condition can in fact cause many problems, ranging from difficulties in obtaining credit approval to being blacklisted by the bank.

Definition of Bad Credit

Bad credit is generally a condition when the borrower or debtor is no longer able to continue paying or repaying debt.

This can happen because the borrower or debtor does not have sufficient funds, experiences bankruptcy, is absent from paying, and so on.

If the borrower delays payment longer, the loan interest set by the bank will increase in amount. The total funds to be paid by the debtor will also increase.

The larger the loan, the more it will burden the debtor until finally the debtor is unable to repay or pay it off.

Various Levels of Bad Credit

Based on the debtor's ability to pay off installments, the level of credit smoothness is divided into the following four groups.

1. Current credit

Credit loans are considered current if the debtor is able to pay installments, principal installments, and loan interest smoothly and has no arrears.

Even though there are arrears, the debtor is able to pay them before the next installment period expires.

2. Credit is not current

A credit loan is said to be non-current if the debtor has arrears in principal installments that have exceeded one installment period, but have not exceeded two installment periods.

In addition, interest payments are two months in arrears, but have not exceeded three months.

3. Doubtful credit

Furthermore, doubtful credit is a condition if the loan can still be saved and there is collateral whose value is at least 75% of the debt price.

Even though the debtor is unable to pay the principal or interest installments, there is still collateral whose price is at least 100% equivalent to the debt.

4. Bad credit

Bad credit is a condition when after 18 months have passed since the credit is classified as doubtful, the debtor has no attempt to repay. In fact, the debtor also does not have any collateral.

Impact of Bad Credit

Bad credit can cause loan interest to increase, so that the nominal amount you have to pay also increases. But besides this, it turns out that bad credit also has an impact on your good name and closes the opportunity to get further credit.

The following are some of the impacts of bad credit on customers.

1. Before a bank gives a loan, the bank will check the customer's history. If a prospective debtor has a credit record that is substandard, doubtful, or even bad, it will be considered high risk and difficult to get a loan.

2. Prospective debtors who have substandard, doubtful, and even bad credit records will be given higher interest. Conversely, prospective debtors with smooth credit history will find it easier to get loans with lower interest.

3. Prospective debtors who have a poor credit record will have difficulty applying for a mortgage. If the prospective debtor has experienced problems with paying for a home loan, the debtor will not pass Checking if he wants to apply for another loan.

Buying a house with a mortgage is often chosen because it is considered to help ease someone's efforts in owning a house.

However, before applying for a mortgage, you should first identify the types, requirements, and how to calculate mortgage interest.

How to Overcome Bad Credit

If in a forced and unavoidable situation you are exposed to bad credit, the first thing to do is to remain calm and be cooperative with the relevant bank. Avoiding the bank will only add to the problem and make your condition worse.

Go to the bank and state your condition honestly and explain why you are in a bad credit position. Ask for the cooperation of the bank to help solve your bad credit problems by restructuring.

The following are three types of restructuring that can be given to debtors who are in a bad credit condition.

1. Rescheduling

This method is done by adjusting the tenor of your loan so that you can repay credit repayments. The bank will extend the loan tenor from debtors who experience bad credit.

This is done so that the installments that must be paid can be lighter. The extension of the tenor is also adjusted to the ability of the debtor to pay.

2. Terms of return (restructuring)

The second way is by restructuring or changing the terms of the loan, which includes changing the payment schedule, term, and other requirements. 

This return requirement can be made on the condition that it does not change the maximum credit limit.

3. Reconditioning

The third way is by realignment, namely the bank's efforts to change credit conditions to ease the responsibilities of debtors involved in bad credit.

This is done by adding credit facilities, converting arrears into new credit principals, to rescheduling and returning requirements.