Filipinos generally have it easy when it comes to their credit history as the Philippines does not measure each banked individual’s credit scores. Though we are mandated to pay our credit bills within a specific period, we’re not rated based on our payment behaviour. In effect, Filipinos are generally less conscious about their payment schedule. Unlike Americans for example, they have to be conscious of their credit rating in case they take on a personal loan down the line. To clarify, it doesn’t necessarily mean that many Filipinos are less responsible when it comes to repayments.
Credit history is simply an account of our credit transactions and repayment behaviour. Thus, our credit payment behaviour has a significant bearing on our financial plans. Our credit history is traced through the data provided by banks to credit reporting agencies. This allows banks and other financing companies to analyse their risks before approving a loan and deciding on a specific credit limit to provide their clients.
With better awareness, small to medium enterprise (SME) owners should definitely be more cognisant of their credit history with regard to future loans that would be beneficial for their businesses.
How your credit history influences your financing plans
Your credit history begins the moment you transact using your personal credit card to the moment you have made a repayment or not. A credit reporting agency collects information from credit card users to prepare for reports they give out to banks. This includes personal information like their credit record, employment history, educational background, and public records that would help prove credit card users’ credit-worthiness, etc. This gives banks who are assessing a loan application good basis for deciding on disbursing a loan.
The information helps control the risks that banks and financial institutions have when it comes to lending. How it works is that when you apply for a loan, the bank you are getting financing from would seek information from their partner credit-reporting agency. The data in each report usually comes from banks you have a credit card account with and have transacted with, specifically on all your credit-card related activities and most especially on your repayment activity with them.
Data on your credit history usually originates and revolves from one bank to the next. If you have a good credit history, meaning, you pay on time and don’t have a big amount of debt, then they would most likely be able to give you a loan. Conversely, if your behavior is more delinquent, meaning you tend to pay later than usual, your chances of getting a loan would be slimmer.
Quick tips on improving your credit history
Start with awareness. Read up on developments in credit history, focusing on additional data they would be seeking and reporting to and from banks and financial firms. Staying aware will help you make good on your repayments with your credit card providers. From here, you would be able to build on a good credit history at the very start.
Be responsible when it comes to paying your bills. Take note of your payment date by marking it down your monthly calendar and never miss a payment.
When the inevitable happens and you miss a payment, try not to repeat this and avoid all roads that would lead to another missed payment.
Your total amount in debts actually add weight to your credit-worthiness so be mindful of your debts and keep them low. The most applicable way to do this is not to max out your available credit limit.
Where to get fast and convenient loans
Needless to say, there would come a time when SMEs would encounter a cash flow problem. We may have planned our finances ahead, but bootstrapping cannot always save the day, especially when we have unexpected boost in demand. When the best solution is getting financing for your business, it’s always good to do research. Evaluate which would give you the most value.
Banks are still the norm and tried and tested option for financing loans, but in the case of many SMEs, a cash flow challenge is usually unforeseen. Additionally, when this happens, SME owners need cash right away. Banks usually require collateral, a lot of requirements, and take time with their vetting process to limit their risks.
At this point, the fastest, most convenient, yet still reliable go-to financing company would be FinTech companies like First Circle. We are trusted by the Philippine government and are a finance partner of the Department of Trade and Industry. First Circle is one of the FinTech companies licensed by the Securities and Exchange Commission in the Philippines.