Personal financial planning is a crucial issue for citizens of any age, who strive to treat their budgets wisely. A credit portfolio can be regarded as a reflection of individual financial decisions that can let a bank or other outside investors judge on the paying capacity and responsibility of a person. Being counted by financial institutions or banks, it becomes a basis for the decisions that would provide additional possibilities to improve the quality of life. Consequently, understanding of a credit portfolio influence on various life aspects and possibilities is an essential contribution to successful budget planning and financial reputation. In order to create the best credit portfolio possible, one should pay special attention to five main points that comprise moral qualities of an individual, the amount of debt one can actually handle, financial resources, supplemental item used to back to loan and current factors that are affecting the economy. Therefore, character, capacity, capital, collateral and conditions are 5 C’s of credit that provide an individual with favorable characteristics of the paying capacity.
A great number of works including Lonier and Aldisert’s one are focused on the issues related to the connection between the above mentioned characteristics and the evaluation they let landers do. Regardless the fact if it deals with small business landings or individual credit, “the investors do not give equal weight to each area” (Lonier & Aldisert, 2007). What is even more important, “one weak area can offset all the other strengths” (Lonier & Aldisert, 2007). For instance, among the other features, it is crucial to be perceived as “a person of character and integrity” (Lonier & Aldisert, 2007). Even when dealing not only with personal loans, but also with business ones, personal characteristics and overall image of a borrower are the essential components to perceive a credit request as a whole. At the same time, the time of the economic downturn is also not successful to get loans, especially when it goes about considerable sums of money. However, time is the economic conditions that can hardly be influenced by a person.
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Carter, Shaw, Lam, and Wilson (2007) emphasize that personal characteristics are of great importance for credit officers propensity to different application. As the research was based on the gender issues that can predetermine the results of the credit portfolio estimation, it has provided evidences that regardless of some differences in the process of a borrower’s assessment, the criteria in all cases stay the same and shows that the “individualized decision making” about loan lending emphasizes the importance of the personal credit portfolio and credit score (Carter et al., 2007). At the same time, the research shows that diversity of the essential criteria for loan lenders are based on a borrower’s responsibility, honesty and ability and “to meet the obligations” (Carter et al., 2007). As a result, such features as personal qualities including marital status, credit history including debts, income levels, and assets that can be used to repay a loan are highly influential.
Considering the above mentioned criteria of credit lending, one can conclude that credit portfolio can be improved if a person would pay more attention to his/her actions and to the credit history with timely payments, put efforts to raise the incomes and assets and work on the decent and responsible personal image. Credit portfolio has to represent minimal risks for lenders in order to let a bank customers’ meet their needs.
For a student who has just started to plan his budget, it is of great importance to pay attention to the credit portfolio demands as it is the age that provides the initial steps for the further credit score development. It is essential to work on the moral qualities that should be manifested to the wider public, putting efforts by studies to get the well-paid job in future, paying attention to the timely payments to bank (regarding any loans, taxes or Chase Bank freedom credit card in my case). In such a way, the initial support of the proper credit reputation is the best way not to miss some chances to get the necessary loans of limits increase in future.