Credit management is an important aspect of the financial management of an individual or business. It involves the monitoring and evaluation of one’s credit history to ensure that it meets the needs of the lenders. Credit management also involves preparing a credit plan for the applicant, which includes establishing and maintaining a working budget, monitoring, and controlling spending, and exploring new credit opportunities. Managing your debt wisely is an aspect of credit management that will give you the best return on your credit management investment.
Credit management is an ongoing activity that has been a part of our lives since the dawn of credit. Credit management began to become more visible in the early nineties, as companies were becoming increasingly assertive about their credit policies, and lenders were beginning to institute policies that would prevent many companies from offering credit to certain groups of people. The result was a need for consumers to understand credit management and the importance of its monitoring. As a result, credit management grew to be one of the most important aspects of personal finance. There have been many changes to credit policies over the years, including the passage of the Fair Credit Reporting Act (FCRA) and the passage of the Truth in Lending Act (TILA), both of which have dramatically changed the way that credit reporting agencies measure and handle credit applications and credit scores.
Since the advent of TILA, credit management has become more complex. Before TILA, companies were prohibited from using race, gender, religion, or age as criteria for approving credit applications. However, TILA expanded the list of permissible criteria to include any measurable performance that was related to a person’s ability to pay. For example, if an applicant had a good credit score but was pregnant at the time of application, this could be used by the lender as evidence that the applicant was not only pregnant but capable of taking care of the baby. In addition to race and gender, a person could use their profession as a criterion for being approved for credit control. This expanded the options that lenders and credit bureaus provided to potential borrowers.
However, credit management policies have undergone a dramatic change in recent years. Since TILA and FCRA made it difficult to deny credit based on race and religion, lenders have increasingly started allowing more factors into the approval process. Some lenders still use race and gender in their credit policy; however, they allow other factors to be considered, including financial history and employment history, among other factors. Because these factors are not used to solely approve or deny credit, they are categorized separately within each credit policy.
One example of how credit management differs between different banks is the way that the same person is judged according to credit limits. If a bank limits a potential borrower based on their income and job status, a credit manager in a different bank might be able to approve a loan for a higher interest rate or credit limit. With TILA, a bank would rely on the credit manager’s overall credit score, which is calculated by looking at a person’s history of credit spending and repayment. Since FCRA only affects an institution’s actions, a bank cannot legally discriminate against people based on their race or religion.
In conclusion, good credit management is vital for borrowers of all income levels. Bad credit management can be avoided by consistently maintaining healthy finances and paying off bad debts. The best way to establish good credit management habits is through education. If you need help with getting a mortgage or car loan, contact your local bank and ask for a free no obligation quote. IF you need help on managing debts visit credit management specialist in Albuquerque.