How to Maintain your Credit balance

Healthy Credit tips & tricks

Owing money to creditors is not an uncommon issue, it has been said that high GDP is proportional to high debt ratio, creating a credit bubble in the economy. In fact, more than 30% households turn to credit bureau and credit referencing agencies for immediate assistance on a yearly basis. Though the numbers are dwindling down over the years due to proper financial education in place, it remains at alarming rates that requires urgent reformation in credit levels.

Examples of Credit bubble crisis

One of the world's unforgettable crisis is the Lehman Brother's sub-prime crisis initiation. What happens is that folks over-leverage on mortgage credit loans and extended payments till the firm is unable to remunerate investors, retail bond holders & commercial derivatives traders, causing a massive upheaval in the finance world. Finally, the nation has no choice but to bail them out and by introducing monetary stimulus and detrimenting the entire economy.

Many jobs were lost as the crisis affects almost all areas of economic and mortgagees are unable to sustain cash flow. The lack of liquidity in certain capital-intensive infrastructures when bust as they're unable to pay up credit terms issued by suppliers, who were visibly shaken by the liabilities in some on the world's largest banks collasped. In the end, forceful payments and upfront confrontations by creditors put everyone in hardship.

Another ancient yet powerful crisis is the dot com bubble. In the late 1900s, everyone was pumping large amounts of money into the US economies, most of the investments derived from borrowing from credit firms, incurring massive debt-to-gdp ratio, surmounting up to 70% of entire economy. This did not stop the influx of cash flow and foreign investments went up approximately 15folds due to materialistic possessions. Everyone wanted to get a cut from the bubbly pie! By then, even non-profitable turnaround companies are being dragged into the scenario, boasting crazy surpluses without any disposable means. Fat checks & dividends for management structures increased exponentially without adequate in-house credit controls, or should it be said 'unstoppable'! Until the economy begins to stagnan due to overwhelming funds, everyone released their investments together expecting mega profits that led to crashing of economy or widely discussed as end of "monetary values". Finally, the dot com bubble burst and many went bankrupt overnight instead of dreaming big in retirements.

Maintain good credit scores by doing Checks & Audits

Forget about lavish indulgence in bachelorette parties or buying up argan oil hair products. Head straight to setup an emergency fund and keep it save, the time to use will come. Firstly, identify all liabilities and list down high interest rate ones. Next up, come up with a checklist for necessary essentials. Eliminate unwanted spendings from nightclubs or expensive high-class restaurants. Lastly, resolve those bad debts that incur high borrowing costs. The final thing to do is to perform audits on a  quarterly basis and review credit scores from online sources. Free ones available for all using a rough gauge. If a credit check can save any potential costs being involved, why not do an opportunity cost to savage the current situation.