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Will A Bank Sleep With You? Understanding Credit As A Relationship Part2

November 21, 2007 By: The Financial Blogger Category: Banks and You, Credit Rating & Credit Bureau 4 Comments →

cheater Yesterday, I wrote about how to build a strong credit history. As an example, I use a relationship between two individuals; Stephen and Lara. Today, we will see how Stephen can easily destroy his relationship with Lara. As a matter of fact, your credit score can be torn apart pretty quickly too. Stephen and Lara are now making a beautiful couple after a few months of good relationship. Let’s see what happen when things turn sour.
Huh?! No, I wasn’t looking (minor things that would hit your credit score)

Lara is starting to have doubt on Stephen. She thinks he is looking at other girls once in a while. Stephen denies those affirmations but his friends are telling the opposite. Do not try to lie to a women, they have a sixth sense for this kind of stuff. So do banks. It’s easy for them to pull out another credit check upon renewal of your credit accounts and acknowledge that you applied for more credit cards. The number of inquiries (looks) and the number of recent credits (a new cute friend) will hurt your Beacon Score but in a minor way. Lara will start to watch Stephen closer to make sure he doesn’t go anywhere else.

Sorry honey, but I will be late tonight, we have a case to finish (more credit issues)

Stephen is starting to make up excuses, his friends are shy to speak to Lara. The doubt is growing as there are many indications that Stephen is not being 100% honest in this story. The explanations are not consistent and it is obvious that Stephen is lying. When you start getting late on your payments, banks are getting very suspicious. They will call you and ask questions. As it is the case in a relationship, it will be worst if you start lying.

Lara… this is not what you are thinking it is… (severe credit issues)

That’s it, Lara knew it! She finally has the proof that Stephen is lying…. in the bed with another women. The trust has been broken and so the relationship. Lara will not be able to look at Stephen and believes him when he says that he loves you. Well being late on cards and going to the point of having a collection agency on your back or declaring bankruptcy is exactly the same thing as cheating on your spouse. Credit is all about trust and you perfectly destroyed any hope of this happening.

Come on Lara, it was a mistake, why can’t we get back together like the old times? (trying to rebuild your credit history)

Many people like Stephen, think they can get away with their “small mistake” and get back with their original situation. So when the bank declines your application in regards to credit issue, ask yourself this question: “Would Lara sleep with Stephen again after what he did?”.

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Would A Bank Sleep With You? Understanding Credit As A Relationship

November 20, 2007 By: The Financial Blogger Category: Banks and You, Credit Rating & Credit Bureau 7 Comments →

Throughout my years working as a banker, I found out an interesting analogy between your credit behaviours and how ones can manage his/her relationship. Today I will write a 25 years old man; Stephen (the customer) and a nice young lady of the same age; Lara (the bank). In this first part, I will write about building this relationship. On part two, I will explain how people can ruin it. So let’s see what happens when Stephen meets Lara. Remember, credit is all about trust. relationship
Don’t try to sleep with her the very first night (credit history)If Stephen is trying to hard on the first night, Lara may be scared and may want to put an end to the relationship before it even starts. When you have no credit history and you are trying to get a credit card, a car loan, a mortgage and a flex line for your renovation at your very first meeting at the bank, you will be declined in a heart beat. Bank, just as Lara, likes to know more about who they are dealing with. Some banks might lend you the money without any questions on the very first date, but be careful, you might end-up with a huge bills in interest and other charges. Those kind of girls are expensive and so are banks.

Be a reliable friend (experience with other lenders)

Let’s assume that Stephen is a real gentlemen and that he did not try to push things with Lara. After a couple of dates, Lara is starting to get interested in Stephen. This is when she will ask her friends and maybe his friends to know more about him. She will pull out his “relationship bureau” to see if he had any issues in the past. Lara is not necessarily looking for long term relationship with his ex-girlfriend but more about his trustworthiness. By asking friends about their perception of Stephen, Lara will have a good idea if Stephen is reliable, honest and sincere.

Be on time, buy flowers, be consistent (general credit behaviours)

Stephen is now in a relationship with Lara (man, it’s not an easy job to keep her happy!). They have been together for a few months and things are going good. Stephen is never coming late from work and he his always ready when they have to go out. He buys her flowers and other nice gifts for her birthday and other occasions. But the most important part, he is honest and consistent. Lara truly believes him and he says that he loves her. Fortunately, banks are not that demanding ;-) In fact, they just want to make sure that you are making all your payment on time and that you don’t lie about your source of income and your assets. As long as you can proof that you are a honest man, both Lara and the bank will trust you back.

As you can see, building a strong credit score is not that hard. It requires time, consistency and honesty. I admit that human relationships are more complicated. But in the end, it all comes down to trustworthiness.

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What to Do With Declined Cases (Part 2)

March 19, 2007 By: The Financial Blogger Category: Credit Rating & Credit Bureau No Comments →

In the first part of this article, we looked at the major reasons why a file could be declined by a banker. We also looked at the possibility to add a co-applicant in order to qualify for the loan. Having a co-signor is not the only options, several other ways might be considered. Here are some examples:

Security

Depending on the type of loan you are requesting, you can offer different types of security. A security is an asset that is legally taken as collateral by the lender in order to guarantee the repayment of a loan. If the goal is to purchase a new car, you might want to give it as collateral. You will still be able to use it, but the bank will have a legal right on it. As cars are not necessarily accepted for any kind of loans, other securities can be considered. The most common types are mutual funds, GIC’s, other fixed income products and real estate properties. All of them can secure either lines of credit or personal loans.

Securing your loan can help if you have been declined because of high debt ratio, recent employment and poor credit behaviours. Depending on the situation, the financial institution might ask up to twice the value of the loan.

Consolidation Loan

If your request is refused because of high debt ratio, your can try to consolidate your debts first. As previously mentioned a consolidation loan will pay off your outstanding debt and bring together under one small payment. Bank might reconsider your application once your profile has been improved. Consolidate your debt as soon as you can. At the moment that banks noticed you are having financial difficulties, they will be more reluctant to deal business with you. Basically, they are in when there is no risks for them!

Other Products

Some people might be declined for a flex line but be approved for a personal loan. The main reason being products are regulated by different norms by banks. Therefore, some product request less criterions than others.

Look Elsewhere

If you have been turned down by one bank, it doesn’t mean that the same story will happen elsewhere. As it is the case with credit products, financial institutions have different criterions of qualification among themselves. Some are specialized in high risk loans and will be more willing to grant loans to an individual with poor credit rating. The bad side of it is that they might charge an arm and a leg for their loan. You can always start with this kind of loan, make your payment on time and transfer to another institutions with a better rate and better lending conditions later on. It will be easier to transfer a loan in good standing as you have proven your capacity of respecting your financial obligations.

Unfortunately, sometimes you just can’t get it through. This situation could happen after several late payments. The best solution in this case is to rebuild your credit history by making your payment on time over a long period of time. In the end, lending is always a matter of trust; hard to gain and easy to loose!

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