Summer News from NEDC

What is credit and why does it play such an important part in business development?

Credit can be defined as the power to obtain goods without immediate payment. The stronger your ability to repay, the more credit you may be granted. The amount of credit you are granted can also be impacted by your ability to pay your bills in full and on time.

Therefore your credit history gives the lender a picture of the kind of borrower you are.

Who determines your credit rating?

The reality is that you determine your own rating by your actions, the agency that records your credit history is Equifax, a national credit association.

Equifax tracks credit through lenders and assembles the information into a credit report.

Therefore, when you apply for credit from NEDC, a bank, a major department store, etc. they will request your credit report from Equifax.

How does your credit rating impact your ability to borrow?

If you have a poor credit rating, it tells the lender that you may not make your payments according to your contract. It shows that in the past there were problems.

If they were small or minor problems, that you have corrected, the lender may be open to doing business with you.

If there were large or more serious problems, such as bankruptcy, garnishments, other judgements, delinquent accounts, etc. the lender will either require you resolve the problems or consider you too risky to lend money to.

Can someone else impact your credit rating?

Yes, but only if you let them. Your credit rating may be negatively impacted by:

�        co-signing or co-borrowing a loan
�        guaranteeing a loan
�        allowing someone access to your credit cards, bank accounts, etc.

Your good credit rating is your responsibility so when allowing others access to it be very, very careful.

So, how do you cleanup your credit rating or stop a potential problem?

It sounds simple to say pay your bills on time, honour your obligations and never borrow more money than you can comfortably pay back, then you'll never have to worry. The fact is that things happen: unforeseen events, illness, accidents, job loss, etc. So what do you do if things happen to you?

1.      If you find yourself in the position of being unable to make your payments contact the lender immediately. Let them know what your situation is, the length of time that it is likely to continue and what you are going to do about it. If you do not co-operate with your lender there is nothing they can do to help you.
2.      Make every effort possible to make at least the minimum payment required.
3.      Try to arrange for restructuring of the debt, so that your total obligations are easier to manage.
4.      If you are in danger of damaging your credit rating through collections or bankruptcy, you may consider short-term loans from friends and family. However don't forget to repay them, you never know when you will their help again.

If your debts are overwhelming and you are unable to meet your commitments as a last resort you may consider the final two options, they will negatively impact your for a number of years.

5.      you can apply to the Orderly Payment of Debt Program- a government sponsored debt repayment plan. For more information contact you local government agent's office.
6.      the final and last resort is declaring bankruptcy.