Mistakes happen to everyone, but some mistakes seriously affect future life. Very unpleasant consequences can be for those who fail to meet their credit obligations on time – such people may have to live with a damaged credit history. Read on to find out how an outstanding cash loan can lead to such a result, what problems it creates and how to clean up your credit history if you are already in debt!
What affects credit history?
Credit history is formed over a longer period of time and consists of both outstanding and outstanding obligations to lenders. Moreover, not only banks and non-bank lenders, but also service providers exchange information. As a result, credit history contains information about a variety of liabilities, such as:
- Consumer credit and current liabilities;
- Used credit cards;
- Study and student loans;
- Car leasing;
- Mortgage loans;
- Debts of the companies in which you are a member;
- Long overdue bill payments to service providers.
Before a new cash loan is made, any lender reviews the information about the individual in the databases, and the bigger the cash loan, the more the credit history is studied. If you want to find out what your credit history is for the lender, you can connect to your internet bank at manakreditvesture.lv and view your data twice a year for free. There you will see your active and historical liabilities as well as information on past delays. Of course, if you’ve ever forgotten to pay a bill for a few days, you won’t see it there, but any longer delays.
The most complete and accurate information on the credit history of Latvian residents can be obtained from the Bank of Latvia home page at entrust.bank.lv, however, in order to connect to this system, you will need an ID card and its reader.
What happens if my credit history is broken?
Consequences of credit hardship and loan evasion are severe. At best, lenders will continue to grant loans at very unfavorable terms, for example, if a person with a good chalk history had an annual interest rate of 19%, a person with a “dirty” credit history would be offered the same cash loan at a 40% annual rate. This means that borrowing may have to be overpaid twice. You may also want to purchase a product for a down payment, but unlike other customers, you may be asked for a down payment. People with “dirty” credit history may not even look at interest-free leasing.
However, at worst, a cash loan to a person with a bad credit history will simply no longer be available. The movers are not interested in working with people who have not proven by works that they can take their obligations seriously. This is particularly true for short-term lenders, who require neither a pledge nor a guarantor. And no one ultimately wants to get denied a car or mortgage just because he had recklessly received an unpaid fast loan several years ago.
It should also always be remembered that people can also be sued for defaulting on their financial obligations. In the event that the claimant wins, the court may have to pay not only the debt but also the costs of the proceedings.
How do I clean my credit history?
A damaged credit history is not quite a shadow that will follow through to the end of your life, as overdue records are erased over time. There are two different possibilities in Latvia:
- By repaying any overdue payments, the credit history “clears” after five years;
- If you do not settle your credit, it will no longer be available to lenders for 10 years after the first delay in payment.
So, the best way to get a clean credit history is to pay off any arrears and treat any bill for five years. By demonstrating this ability to handle financially responsible, virtually any cash loan will be available again after five years. It is important not to make false promises to purge your credit history for a certain fee, as these matters are regulated by law and are subject to very close supervision by credit institutions. Debt repayment and time are the only solution on the road to life “out of the white paper”.
Keep this in mind so that a cash loan doesn’t ruin your credit history!
To avoid having to worry about cleaning up your credit history, you need to follow several principles of responsible financial literacy.
Borrow as much as you can repay
To understand how much you can borrow safely, you need to objectively estimate your monthly income and expenses, including a certain amount of budget for unforeseen expenses. For example, if your salary is USD 800, you will subtract all your expected monthly expenses – living, telecommunications, transportation, food and household items – and leave at least a third of the remaining amount unexpected. The remaining amount will be the maximum you can spend to repay the cash loan. If you feel that your cash loan is bigger than your free funds, choose to pay it off gradually rather than all at once.
Avoid communication with the lender
If you are already in a situation where the cash loan is greater than your current financial ability, there is no way to hide from the lender. An open conversation will always be better than avoiding communication with who you owe. Possibly a cash loan can be split into smaller payments, which will not cause you so much trouble. If your cash loan is not one, but you have a number of troublesome loans, you can combine them and create a more convenient repayment schedule. In any case, lender representatives are also people, and with them it is possible to find solutions to get their money, but the client is not on the list of debtors.