Advertising
Advertising

6 Ways to Make Sure You Get the Loan You Need

6 Ways to Make Sure You Get the Loan You Need

Remember in grade school when your teachers would warn you about your “permanent record?” At some point, you most likely figured out that was just a scare tactic to keep you in line until you graduated high school.

Once you entered the “real world,” you were soon introduced to another permanent record of sorts: your credit score. However, unlike the enigmatic permanent record of your schoolyard days, your credit score does, in fact, exist, and absolutely will affect the rest of your life in one way or another.

Advertising

So how do you keep it in good standing and ensure that you’re never denied from taking out a car or home equity loan?

Check your credit score often

If you’re gearing up for a large purchase that will depend on your ability to receive a loan, you should keep up-to-date with your credit score on a monthly basis. There are many ways to check your credit or CIBIL score for free, or you might opt for a more in-depth report that will usually come with a fee. While it’s a good idea to keep track of your credit score even if you’re not in the market for a new car or home, you shouldn’t obsess over it; it won’t change more than once a month. Focus less on your actual score, and more on improving it as best you can.

Advertising

Keep credit balances low

A lot of people fall into the trap of overspending using their credit cards simply because they can. This sort of irresponsible behavior can lead to missed payments, increased interest rates, and decreased credit scores. On the other hand, using your credit cards only for expenses that will immediately be paid off will show creditors that you are responsible with borrowed money, and they’ll be more likely to offer a loan in the exact amount you’ve asked for. A good rule of thumb is to keep your balances under 30% of your maximum; this shows lenders you have restraint, and will also give you some wiggle room if an emergency arises.

Pay your balances on time

While it’s pretty obvious that letting your bills go unpaid will result in a low credit score, it needs be said that late means late. It doesn’t matter if you’re a day late, or 29 days late: if you’re late with a payment, it’ll immediately be reflected on your credit score. Though it’s recommended that you pay much more than the monthly minimum, you should always pay at least that every single month. This goes back to the last point: if you’re unable to pay off your debt, you shouldn’t have made the purchase in the first place.

Advertising

Take care of small debts

As should be clear by now, credits and loans should only be used to make purchases that you’ll be able to pay off in the near future. You should never use a credit card simply because you don’t feel like “actually” paying money out of your pocket at that very moment. If you run into a jam and absolutely must use a credit card for a purchase while you’re out, make it a point to transfer money over to pay off your debt the first chance you get. You don’t want to be late on a small $30 payment because you forgot about it later in the month.

Similarly, don’t spread out these small debts over multiple credit cards. Keep your debts focused into one or two accounts, and close out the rest. There’s no need to tempt yourself with five different credit cards with no balance. Remember: the limit on your card does not represent money you actually own, but it could represent money you owe.

Advertising

Flaunt your good standing

It’s possible to request that certain loans be removed from your credit history once they are paid off. However, doing so will usually end up doing more harm than good to your ability to receive a loan. Say you’ve paid off a car loan in full at some point in the past. You made the monthly payments on time, and even paid it off quicker than you had planned. Why would you want to hide this? You want potential lenders to see that you can take out a loan and repay it responsibly. The only time you’d want to hide an account is if it’s in bad standing; of course, getting this history off your report won’t be nearly as easy.

Don’t give out more information than is reported

Credit scores exist for a reason: they give lenders a ballpark idea of how trustworthy you’ll be with their money. If lenders operated on the information given to them by potential borrowers…well, I’m sure you know what would happen. If your credit score comes back lower than expected, don’t make excuses. Everyone has a sob story to tell, so it won’t help your cause explaining that you broke your leg last year and couldn’t work, or you lost everything in a flood and needed to max out your credit cards. Your lender might feel for you on a personal level, but when it comes to business they’ll have to deny you the loan based solely on your low score.

On the other hand, if your score comes back better than expected, keep your mouth shut! You’re right where you want to be, but anything you say has the potential to be misconstrued. Save the happy dance for your living room after you’ve signed the loan papers.

Featured photo credit: JJ / Piggy bank full of dirty coins / Flickr via farm4.staticflickr.com

More by this author

7 Public Speaking Techniques To Help Connect With Your Audience 20 Little Signs You’ve Found The One 8 Signs of a Man Who Will Never Ever Stop Loving You 8 Things To Remember When Dating Someone With A Guarded Heart 14 Signs You’re Not Drinking Enough Water

Trending in Money

1 How to Use Credit Cards While Staying Out of Debt 2 How to Use Debt Snowball to Get out from a Financial Avalanche 3 How Personal Finance Software Helps You Get More Out of Your Money 4 The Best Ways to Save Money Even Impulsive Spenders Can Get Behind 5 How to Answer the Tough Question: What are Your Salary Requirements?

Read Next

Advertising
Advertising
Advertising

Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

Advertising

Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

Advertising

I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

Advertising

Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

Advertising

So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

Read Next