Credit management refers to a wide range of financial activities that are designed to help borrowers understand their credit as well as implement sound debt relief strategies for achieving it. Proper credit management includes establishing credit, maintaining it, protecting it, as well as extending it. Credit management is also the procedure of awarding credit, establishing the terms under which it is awarded, recovering that credit after it has been repaid, and ensuring compliance by business credit policy with respect to the amounts loaned. When properly managed credit can result in significant improvements in your credit score and credit history. Credit management also helps you maintain a healthy credit score because it makes it difficult for lenders to deny credit.
Establishing credit management involves establishing a credit policy and sticking to it. In the case of banks, the policies may include the following: setting up an account that is accessible only to borrowers who have a good credit score; not allowing new or potential borrowers to have access to all available credit; maintaining accurate contact information with all borrowers; and assessing the credit report and credit scores of all borrowers and credit-seekers. An effective credit management system may involve all of these aspects, or just some of them.
Another aspect of credit management involves recovering bad debt. Bad debt occurs when a borrower fails to payback the loan or credit purchase in full after a grace period, typically of six months, has passed. If bad debt occurs, potential buyers will be turned away from the bank, which is why it is critical to develop an effective credit management process that can turn bad debts around. As part of credit management, bad debt is also considered as a factor when potential buyers are pre-qualified or when they are offered a loan by the bank.
Another aspect of credit management involves extending credit, which is also known as credit control. Credit control is the ability of a lender to approve a loan to a borrower, based on information about the borrower’s ability to repay, including credit history and income information. A good credit control policy allows a lender to extend credit to borrowers based on their credit history and income information, which eliminate the risk of lending to individuals who are not creditworthy. A credit control policy is considered to be a viable option when borrowers are looking for a loan. However, many lenders use credit control as a last resort to approve loan applications.
A good credit management practice is regularly paying bills and other financial obligations on time. Although it is true that sometimes bad debts do not come due, but there is no reason for a lender to continue to extend credit to someone who does not plan to pay the bill. As long as the payments are made on time each month, a borrower has demonstrated responsibility in meeting financial obligations and a history of making payments on time. This demonstrates the bank that the person is capable of making payments.
Another important credit management practice is to cancel credit cards and close bank accounts. Having multiple credit cards and a large amount of debt can create additional financial strain. It is also not a good practice to have a large amount of outstanding loans. When a bank account becomes maxed out or a credit card debt is more than the available credit allows, the bank will often cancel the account. This makes it difficult to get future credit cards or loans, and the effects of these actions can impact credit scores. Therefore, it is vital to develop good credit management habits to avoid these negative consequences. If you need help in managing debts or credit visit a reliable Albuquerque credit management specialist.