Finding credit needs to be approached as if you are trying to find a really good job. Anybody can fire out a dozen resumes around hoping someone calls them back. Fewer people research the type of job they prefer doing and whom they prefer doing it with. These people are better prepared to land a job they want, and where they want. Finding credit for the first time is similar to finding a really good job. It needs to be done smartly, and you need to be prepared.

On occasion, it is very sensible to borrow in advance of a need. This starts to establish a strong credit history because you will pay it back promptly, or could provide the needed cash prior to a financial concern. With this in mind I would like to discuss for easy steps you can carry out and comply with to make your borrowing process go smoothly.

Step One – Complete Your Personal Statement of Affairs (PSOA)

a) This is a snapshot picture of what you owe compared to what you own. If you don’t have credit this will be a simple list to make. When you have credit, be sure to list all your bank loans, credit cards and car payments beside the assets they help finance.

b) if after making this list, you find that the amount of debt is greater than the value of the assets you own, you have what they call a “negative net worth”. If this is true for you, it will grow increasingly difficult to obtain new debt without the value of an asset linked to it to maintain the balance. For example; a loan for a motorcycle may be easier to obtain than an unsecured line of credit, or additional hard security may be required (cash, investments, or collateral mortgage on your property will need to be taken).

c) on the same piece of paper include your monthly living expenses and all forms of income to determine whether you can afford new debt before applying. At the end of the day it doesn’t matter if the bank grants you a new loan or not, if you can’t pay it back. Be sure you can pay before applying. If you’ve decided you’re not likely to get the loan you want to apply for, then don’t apply! Make an appointment with the bank to review your situation. They will either confirm or deny your feelings with by requesting a copy of your credit report from the credit bureau agencies.

d) banks usually provide options and actions you can take to better position yourself for the next time you apply. Write down all of their advice, read it back to them to establish a commitment from them that if you followed their direction, they would quite likely be interested in lending to you later. When in agreement, this list becomes a check list for you on what the bank needs to see in order to lend to you.

e) take time on this step to determine how you present yourself and sell your strengths (savings, assets, stable employment and address for more than a year or two) in a snapshot.

Step Two – Review Your Budget

a) once your personal statement of affairs has been completed, review your monthly budget against it to ensure you are able to meet the commitments you already have before taking on a new one. If you can’t afford a new loan payment, rethink your options before going to the bank. Any time they see a possible borrower come into their offices and ask for money when they are definitely not capable of being approved, it shows poor judgment and that you are a shaky borrower. Never forget home important first impressions are.

Step Three – Review Your Personal Credit Agency Report(s)

a) it is important to review your credit rating before you apply for any credit. Call the credit agencies for a free copy of your report. If you are not sure how to read it, call them for assistance. Try to completely understand the very document you’re attempting to build for your financial needs. Today, all you may need is a $5000 loan, but if you’re not focused on building strength in your credit rating what about later? What about your first car – what about your first home?

b) if there is derogatory information on your credit file that is in yours, call the credit bureau(s) and ask how to remove it. Get a letter from the company that reported the items stating it was reported in error. You will need this letter as an attachment when submitting your credit application.

Step Four – Prove Your Income

a) you will need to prove your income in any application for credit. Banks will ask for proof in the form of a recent employment tax slip, paycheck stub and / or employment letter, recent notice of assessment, and possibly a copy of your last tax return, depending whether or not you are self-employed or have an extra income supplementing your employment income.

b) I recommend having all of these available for your client interview. This is a very basic 4 step checklist you can carry out before you even walk into a bank. You will be in a much better position to be treated seriously, with dignity, and with respect. Hell, you might even get approved.

Continued in the Carol’s Borrowing Series Category of Clf.