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NEW ERA UNIVERSITY COLLEGE OF BUSINESS ADMINISTRATION

Chapter 6 & 7
Credit and Collection Report

Aquino, Shaira | Denson, Liezel | De Ocampo, Jenifer | Donato, Mae Ann | Labayani, Dianna Rose
Limon, Czerella | Abao, Ansielyn | Atienza, Pauline | Espejo, Michelle
Group 8




Chapter 6 Financial Measures Used in Credit and Collection Procedures
Chapter 7 Debtors Culture, Psychology, Practices and Idiosyncracies
CHAPTER SIX

FINANCIAL MEASURES IN CREDIT AND COLLECTION OPERATIONS

The credit and collection operation encompasses not only the weighing of the effects of credit
extension and collection efforts on credit sales. Maximizing sales thru credit must be taken into account
in deciding to grant or refuse credit as well as in enforcing prompt payment on such accounts. Generally
however, this objective focuses attention on the issue of not losing sales; or, to promote new credit
sales in symbiosis with the sales operations. In this way the credit and collection operation is considered
as a team member of the sales force working in positive tandem.

Cost to collect an account is another way to measure credit and collection contribution to sales. The
actual expense of the credit and collection operation is match with the volume of collection made
during a given period. In some instances an average cost to collect is arrived at and match with volume
of collection made.

Average cost obscures the collection experience with marginal account, the kind of account where
control, costs and effectiveness of collection efforts are tested. In the credit extension efforts of the
credit and collection operations look lenient in extending credit to marginal or questionable customers
or losing money for the creditor for not accepting more. In essence this summarizes the matter of
measuring the measuring the effectiveness of credit granting; and, it cannot be answered by averages of
the method described.

In short, the matter of evaluating the credit and collection effectiveness in credit granting as well as
efficiency is too broad than any of the method discussed.

Gauges for Sales Maximization

The grant of credit stimulates more sales which results to larger volume of business.

1. Credit Sales Index

In all business of manufacturing, marketing, lending it is important to know the portion of total
sales represented by credit transaction thus;

Credit sales Total sales = Credit Sales Income

Its advisable to know the percentage of business done on each type of credit such as C.O.D.,
instalment credit, charge accounts and revolving credit accounts, by company, the month to month
or over a period of years. This gauge affords a good picture of the credit business one has and the
effect of its conduct regarding its credit and collection policies. Comparison with other businesses in
similar industry and under similar conditions may indicate something of the relative success or
failure of the company seeking credit business.

2. Number of New Accounts Opened

Indicate the extent of sales being made on credit, company is open to the opportunities of new
credit business.
It also indicates the effectiveness of the promotion and advertising of the companys credit
offer. In sum, the gauge together with the rejection percentage will measure the restrictiveness of
the credit policies. Its practical to show the number of new credit granted as a percentage in
relation with the total number of active credit accounts.

3. Rejection Index

A measure to determine the proportion of credit applications refused credit.

Application Rejected Applications Rejected = Rejection Index

This is a valuable index to ascertain the percentage of credit applications refused and also to
determine how much business is lost by refusing credit applications from old customers/debtors. By
this process it is possible to ascertain the degree of restrictiveness or liberality in enforcing the
credit policies.

4. Inactive Accounts Index

Credit sales and total sales volume may be increased by a good credit sales campaign targeting
new credit customers or by motivating current accounts more active purchases on credit or
reactivating docile credit accounts to become active. The extent to which this is undertaken maybe
measured by a ratio, the more effective the efforts directed in the efforts.

MEASURES TO DETERMINE EFFECTIVENESS AND EFFICIENCY OF MANAGING
ACCOUNTS RECEIVABLE

A business must over accounting periods recover the funds it invested in its accounts receivable
for it to pay its financial obligations or reinvest the same which may increase its profits for income.

Many ratios have been used to monitor the credit and collection effectiveness and efficiency.
Among these measures are;

1. Collection Percentage Index

Collections made during the period Receivables outstanding at the
beginning of the period = Collection Index

Plot the collection percentages on a chart and you will be able to see the general trend in collection
as indicated in the resulting curve. When the collection are unfavourable, remedial collection efforts
may be undertaken, and to determine extraneous causes of unfavorability of collection.

2. Average Collection Period

This is a similar measure to the collection index that estimate the average length of time that
receivables are uncollected. It is arrived at by dividing the number of days in the credit term, shown by
the term of sale, by the collection index, thus;

Net Credit period Collection Index X 100 = Ave. Collection Period

The collection arrived at, is deemed the effective credit term. Like all average it does not
necessarily indicate the actual experiences upon which it is computed. It may be possible that not all of
the accounts receivable is collected in full as of certain date but may follow each other past the credit
term. Nonetheless, as in all averages it is significant and good measure of the collection efforts and of
the accounts receivable quality.

3. Delinquency Index

To determine the proportion of all accounts receivable in number and in amount that is
delinquent.

Total Delinquent Accounts Total Accounts Receivable = Delinquency Index

Successive computation by period of this index may serve as thermometer of the trend of
delinquency whether it is improving or deteriorating. If the index or percentage increase faster than it
should at any given period, proper task force collection efforts must be undertaken to stop the trend
and bring back to normal the delinquency.

While the delinquency index is generally computed as a percentage it may be more meaningful
to compute it as a percentage of the first 20% of the total receivable portfolio to determine the effect of
delinquency on the bulk of the receivables.

4. Accounts Receivable Turnover

Delinquent receivable outstanding over the term of ales is similar to slow moving merchandise
inventory because they affect the productivity of the investment, and the activity of the investment. It is
arriving at as follows;

Total Credit Sales Average Receivables Outstanding = Receivable Turn Over Rate

The receivables outstanding at the end of the accounting period are generally used rather than
upon an average figure for the computation of the rate. Unless, the business ending receivables may
affect materially the result.

If the turnover rate is higher than the average in its industry, its indicative that collections are
promptly and effectively made; or, that with a given amount of fund invested in the receivables a bigger
amount of credit business was made possible. Whether an opposite condition of the rate was
attributable to either inefficient collection efforts or inefficient sales efforts must be determined by
analysis of the collection index and the credit sales index.

5. Activity of the Investments

In receivables may be as a rate or in terms of number of days needed for one revolution of the
accounts receivable. Thus, it is arriving at as follows;

360 days Receivable Turn Over Rate =
No. of day of credit sales outstanding (days of one revolution of accounts receivable)
Another way of availing of the number of days of credit sales carried in the accounts receivable
is computed as follows;

Accounts & Notes Receivables Average Daily Credit Sales =
No. of days of credit sales outstanding

This measure in terms of days must not be confused with the number of days in average
collection period.

6. Receivables as a Percentage of the Total Assets

The amount of receivable as a percentage of total assets is used to gauge the effectiveness of
funds invested in accounts receivable. A very low percentage of assets in accounts receivable indicate
very strict credit and collection policy. On the other hand, a very high percentage of receivables will
show collection of accounts receivables.

7. Past Due Index

Total past due receivables Total outstanding of delinquency in the receivables

This gives an indication of delinquency in the receivables. It indicates the health of trade
receivables vis-a-vis the projected targets of efficiency.

8. Percentage of Credit Applications Rejected

Comparatively, the proportion of credit applicants you deny credit depends upon your credit
policy and upon the general financial situation of the market in your industry. To get your ratio for the
given month, divide the number of applications rejected by the total number of applications considered.
This ratio is of great value to you in monitoring that you enforce your policy in a no-nonsense way.

You may be able to get industry averages through your trade association, or perhaps a few
credit managers of competing firms will tell you their ratios. If so, youll be able to measure your policy
and its administration against the norm for a company like yours.

9. Volume of Active Accounts

If your outfit is a small company, one large new customer may make your progress look a great
deal better than it actually is. Conversely, one substantial customers failure could make the picture look
a lot worse than it should. Consequently, the volume of active accounts record is suggested as a means
of studying your departments performance in relation with the whole companys performance.

Heres how to do it: Keep a running record, month-by-month, of the number of active accounts.
This figure is a base for computing several interesting cost figures, one or more which may be useful to
you:

Credit department costs per account serviced (credit department costs for the month divided by
the number of accounts.)

Average sales per account;
Average profit per account;
Average receivables per account;
Average collection costs per account;
Average number of accounts serviced by each credit employee.

10. Inactive accounts as a Percentage of Total Accounts

This very useful statics indicates the success of your credit-sales efforts. To find the percentage
of inactive accounts, divide the number of accounts to which no sales were posted during the month by
the total number of accounts on your books at the beginning of the month.

SUGGESTION: For sales letter approach, institute a control to bring accounts that have been
inactive for a certain length of time to your attention. A good program would be to send a sales
at the end of three months inactivity, another at the end of six months, and a strong appeal at
nine months. Accounts inactive for a year should be transferred out of the current files in most
businesses.

WAYS TO TAKE UP BAD DEBTS

Direct Charge-Off
Its the simplest method, and generally the least desirable. Its simply to write off the accounts
receivable as they turned bad, charging them to d=bad debt expense, correspondingly reducing the
income for the period. Generally, written-off account receivable may not really occur within the period
when the sales was made, thus the income for that period may be overstated.

Provide an Allowance for uncollectible Accounts
The periodic analysis of accounts receivable under the aging schedule from the aging schedule
analysis it may be determined which f the receivable mix may go uncollected based n the creditors
experience.

As compared with the direct charge-off, this method is unlikely to result in a correct matching of
the bad debt expense with the revenue related with it. With a consistent pattern of uncollectible
accounts receivable due to poor socio-economic condition overtime the discrepancy may correct itself.

Allowance for Bad debts Based on Sales
This is the cause and effect method of recognizing or taking up bad debts. It charges periods
income with an approximated percentage of credit sales for the period, based on past bad debt loss
experience. In sum the revenue from total sales is charge by a percentage for the relationship between
cash and credit sales is relatively constant the percentage of uncollectible maybe stated based on total
sales rather than credit sales only.

In any of the ways used its always advisable to have a good working aging schedule to test the
appropriateness, reasonableness of the allowance for uncollectible accounts.

By theses ways of taking up bad debts it may be possible to check, control, evaluate the credit
and collection administration of the receivable portfolio; as well as to monitor if sales reported are good
collected sales.

In any way bad debt is taken up, it is important that the write-off be supported by an affidavit of
non-collectability by the attorney who pursued the legal collection efforts or by the collection agency to
which the bad account was assigned for collection.

The affidavit must be duly backed up by an official certification by the Assessor or the Register of
Deeds Office and other related government registry of property that the defendant/debtor has no
legible property against which collection can be enforced.

CHAPTER SEVEN

DEBTOR'S CULTURE, PSYCHOLOGY, PRACTICES AND IDIOSYNCRACIES

Filipino Traditional Practices
Related with Credit and Collection

1. Hiya syndrome - Emotions arising from a relationship with a person in authority or positon.
2. Kapwa-tao - Support and sympathy for the less fortunate and the under-privileged.
3. Pakikisama - Peer grouped influence.
4. Bahala Na - Fatalistic resignation or an indifference to change a negative prevailing situation.
5. Lakad or Compadre System - The need for a third party assistance.
6. Ningas cogon - The short-lived enthusiasm of a person.
7. Maana habit - Postponing until tomorrow the things one can do today.
8. Friday collection practices - A subtle way of stretching credit payment.
9. New Year or night collection practices - Particularly true among the Chinese, Filipinos.

Filipino Buying (Credit) Practices

1. Hulugan, Paiyakan or Salary Deduction (S.D) - The practice of buying on installment and paying
within a long period of time.
2. Tawad practice - The propensity in asking for undeserved discounts.
3. Dagdag practice - The practice of asking for a little more.
4. Suki system - The practice of obtaining goods, services or loans from a favorite seller/creditor.
5. The Pasiklab or Matching the Joneses Syndrome - The propensity to follow the habits and
practices of one's neighbors, friends or relatives.
6. How to use Shame or Hiya as a Tool of Collection:

Loss of face or shame (hiya) may consist of:

a. Embarrassing the person;
b. Humiliating the person;
c. Causing that person to feel inferior and not "part of the crowd";
d. Insulting the person;
e. Placing a person in a ridiculous situation.

Muslims Credit and Loan Convention/Practices
The success or failure of a loan or credit transaction with our Muslim brothers is, to a large extent, due
to our ability or inability to understand and incorporate into our credit and collection policy their distinct
credit practices/convention such as:
1. Wadiah - The deposit of goods with another for safekeeping. The goods may be used with or
without reward, but they must be guaranteed as to their return at a specified time. This is
substantially similar to commodatum/mutuum under the New Civil Code.
2. Mudharabah - A profit and loss sharing arrangement between capital owner and the one
managing the capital. It is simply an equity financing arrangement which must specify the share
of each party. The capital owner is prohibited from interfering in the management of the capital.
3. Musyaraka - A rough equivalent of venture capital. Both parties put up capital, jointly manage
and share profits and losses according to a predetermined ratio without regard to the amount of
capital contributed.
4. Murabarah - A purchase and sale method of lending with a non-excessive, pre-arranged and
specified mark-up between capital owner and a buyer who is not in a position to pay
immediately.
5. Qard Hasan - A "benevolent fund" or scheme whereby a borrower rewards a lender at his own
discretion at the end of the agreed term of the loan.

PERSONAL CREDIT DISCIPLINE
The overall credit standing or rating of any country is the sum of total of the individual credit
performances of its people. How a country's people use, manage, enforce and value their individual
credit will determine its credit rating in the community of nations.
It is outmost importance for the people of a nation to keep close watch and prudent exercise of
no-nonsense discipline in the use of their credit or of getting into debts.
Buying on credit or granting credit in the Philippines is generally no big problem. It is the
individual credit buyer/borrower who must exercise judicious and prudent credit availment if he/she
does want not to be consumed or be destroyed by the unwise, indiscreet or less judicious use of credit.
Remember that, "credit is like a flame of fire; use, value, nurture and manage it well." How much Debt
or Credit is Safe? There is no readily available rule on what is safe.
For the money lenders they generally go by a certain percentage (disposable income) of the
gross income. For the sellers on credit for goods and services, they generally do not go by any guideline
on credit. Because buying goods or services are, most often than not at the point of sale where no
reasonable time is allowed to the seller to expeditiously determine what is a safe credit to be granted to
a credit buyer. On the other hand, the lending institution can use only the individual borrower's gross
income and loan incurred averages to determine credit risks it can grant an accept. No one can know for
certain how an individual credit buyer/borrower will repay. Only the debtor concerned can gain that,
based on his credit habits, practices, values and needs in present or future socioeconomic-political
environment.
How does one determine what kind and amount of debt can one handle? To help you decide,
you must know at any given time how much money you have for optional spending and then how much
money you have for optional spending and then how much of said amount you can program for fixed
repayments.
Here are some guidelines for determining how much disposable/optional money you have.
1. List down your annual take home income, add your other incomes from sources other than your
employment which will come in within the period less annual deductions such as for; taxes and
the like; home income and divide by 12 to get your average monthly take home income;
2. From your monthly income deduct all your fixed monthly expenses such as; for rent, light,
water, food, clothing, shelter, transportation and the like ,
3. After doing No. 2 add and total your monthly non-mortgage obligation and deduct them from
the balance in No. 2;
4. The amount you're left with is your monthly optional or disposable income. You must give
serious considerations on how comfortable you are in living or managing this amount. Consider
the amount less the new monthly obligation or repayment you'll get into. Can you manage on
the remaining amount or you must wait until your take home income goes up or your present
debt goes down.
Are You Headed To Money/Financial Troubles?
1. Your bank book balance is getting lower each month.
2. You are always on overdraft and/or borrowing.
3. When you pay it is only the minimum due or even less on your charge account.
4. You have borrowed on your insurance cash surrender value: without any intention to repay the
loan.
5. Your savings account is fast disappearing or has disappeared: you are unable to put in some
money into saving regularly.
6. You do odd business and/or work overtime most of the time.
7. You depend too much on credit cards or credit for day to day expense or use cash advances to
pay off debts.
8. You are behind two or more installments in your amortized obligation.
9. You do not know who and how much you owe.
10. You received frequently overdue notices, phone calls from creditors.
11. Give excuse to one creditor; pay the other when really pressed.
12. Growing family disputes over money.
13. Always ask for extension to pay creditors.
14. Took loan to pay another loan past due or took out debt consolidation loan (A "londoneer" kind
of a debtor- borrow here and there to pay loans).
15. You are almost always above your credit limits.
16. You get the longest time and lowest amount to pay when you get credit.
17. You must borrow to pay bills, you can anticipate like taxes, etc.
18. Although you pay your debts, you are forced to continue living on credit which results into
debit/loans which does not shrink but balloons.
19. You almost always hide or avoid talking or meeting with your creditors.
20. Do things or actions inimical to your creditor's interest like selling, mortgaging properties or
changing address?

Some Worthwhile Advice in Lending/ Credit Granting
(By: Zoilo P. Dejaresco III FINEX)

1. Endeavor to observe FIFO or LIFO Method of Lending/collecting. Avoid the FISH First
Is Still Here Borrower;
2. Always have a good, enforceable document to cover your lending/ credit;
3. Credit Limits as Borrowers Limit must not be interpreted as a goal but a limit and
control. They are not tools to buying into a share in the credit market;
4. Credit standards must as all times be maintained and fortified not lowered;
5. Guarantees must always be joint and several or solidary and not just anyone be
accepted as a surety;
6. Always go for quality not in size in your lending or credit granting - name lending;
7. Do not ignore professional and/or official reports, comments on the borrowers balance
8. Avoid the fallacy that, its practical to lend or grant credit to those who dont need
money and/or to those who exhibit excessive lifestyles SCOs ( social climber na
obvious) or OAs (over acting) debtors;
9. Always look at and use the liquidation value analysis or collaterals Half Full-half Empty
analysis
10. A visit to a borrower debtor is far more effective and meaningful than a telephone call;
11. Never finance long term assets with short term loans and fund expansion in a sunset
market;
12. Ability to sell must never be fully appreciated unless it is coupled by a proven ability to
collect;
13. A high financial bottom line or net income must be free from operating income or gains
for sale of company assets or properties or exchanges therefrom. Management
ingenuity must not be confused with the financial creativity.
14. When granting credit and lending to group of companies never ignore the affiliates and
subsidiaries.
15. When in doubt hold credit.



Personal Money Management and Financial Independence
( Reprinted from Beyond Bottom Lines, Philippine Star, July 2, 1997 issue.)

At one time or another have you felt something like this
I dont have enough money.
I always have to save but something always come up that I end up spending it.
I dont understand it. Why do others appear to have enough and I dont.
I cant control myself. Whenever I have money in my wallet, its gone before I know it.
Thank goodness for credit cards. Well- unit its time to pay and then. Ooooh its painful
especially because I have overspent again!
We are always in crisis about money.

My sister Kay told me that a group of women wanted to talk to me knowing that I am a
financial executive, to discuss personal finances. She said they wanted to talk about money
management and having financial independence.
First we need to understand.
What does money mean? To you? To me?
Does money spell success? Do you feel people who have money change your mood?
Are you in a good mood if you have money?
Do you know that money is just a fool? That money is peerless and money is a neutral
commodity?
In my personal experience, I have found that the best way to manage money and have
financial independence and even confidence is to:
I. Live within (or even below) your means

Dont spend more than your income. Dont keep up with the Joneses. (You dont
know if they inherited some riches or are up to their neck in debt!)

A. Simplify your life.

Do you have a lot of needs? Or are they really wants meaning not necessary but nice to
have. Our family usually goes to a small island in Lubang every summer where life is so simple.
There, I get my feet really on the ground.

. . . and realize I dont need anything except the basics. Food three times a day, shelter above
my head and clothing. It has a way of refreshing y soul. My love for paintings, antiques, nice
clothes and shoes relevant there. Even if I wear Ferragamo shoes, it is meaningless it wont be
appreciated and its not practical.


B. Know your financial conditions, your spending habits, and cash flow how much
income comes in and out.

To know your financial condition, prepare a personal financial statement of your assets and
liabilities. How much are you worth?

Develop a spending plan. Do you know how much you spend? How much did you spend on
food, on new clothes, new shoes and bags last month? You dont know or probably dont want
to know. Are you a spendthrift? Do you spend everything in your wallet? Impulsive or
compulsive buyer?

Keep a record for the next 30 days of what you spend. You may just be shocked to find out how
you spend your money. Or look at your checkbook and get an idea of what you spend your
money on.
Prepare a cash flow statement. To plan how much can go out you dont know how much is
coming in. you must have a cash flow statement.

Cash flow is a valuable tool in projecting growth and boosting profits for business and it will
work for personal as well.

You will become financially confident by learning how to manage what you already have.


II. Save and invest


There is only one way to accumulate money. You must have mor money coming in than
going out. Earn more money than you spend.

Dont spend all. I you cant make both ends meet, how can you save?

What has worked for me is forced savings. Have a goal so you can withhold spending for
the achievement of this goal, say for a trip abroad, a painting, a lot and a house or whatever,
etc.

Susan, tess, and Alma are sisters and thy inherited 100,000. Susan used the new found
money to travel abroad with the whole family to fulfill a longtime dream. While Tess sent her
qualified son to be educated abroad and Alma invested in a small sari sari store. Which one
invested the new found money better? I dont think any of us can judge, it all depends on their
beliefs and values.

We will never have enough if we spend more than our income and if we dont save and we
dont invest.

Investing means to put money to use in something offering profitable returns. It is an active
process vs. savings which is a passive process.

Investing means accepting some risk with the prospect of earning more.

It is not so much what you have but what you do with what you have that counts. And how
much you maximize these possibilities?

Some guidelines/ tips in investing:

1. Dont invest in anything you dont understand.

2. Or if you do, dont pull all your eggs in one basket diversify.

3. Dont put all your money in illiquid assets; you need to have liquidity in
emergencies. Some companies may be profitable but illiquid.

4. Dont be too greedy.

5. Get a wise investment counselor someone you trust. but I have also learned
one secret: give some money. This means.

III. Be a Giver


This means to share our blessings. In fact he bible asks us to give 10 percent of our
income/ fruits.

To give is to acknowledge that God will provide and God will protect. The act of
giving invites Gods supernatural intervention into our lives and finances to open our
lives to that kind of poser is just too awesome to miss.


Do you want to be financially independent? Live simply, live within your
means, save, and give!

CREDIT REPAIR
A good name is to be more desired than great riches.
Favor is better than silver and gold. - Proverbs 22:1

Maintain, nurture, Rebuild your credit
Credit is like a flame; use. Value, nurture and manage it well lest it will destroy you.

Credit is not matter of right. It is a privilege extended or granted to trustworthy individuals. It must
be earned to enjoy ones trust and confidence, to enjoy someones credit grant.

Who sees/Uses Your Credit Records
There are many who are interested and may use your credit records. Among these are;
President, future creditor, lender, business partner.
Lessor, mortgage
Employer, friend, in-laws
Insurance, pre-need companies
Government agencies
Enemy

Protect, prevent your credit records from failing into the hands of wrong people.

What Facts are Investigated About you; ( What is a Credit Report )

A. Identification data
1. The facts and information about the trust and confidence in you, among others
information on;
a) Personal circumstances (name, sex age, marital status, birthdate, dependents, address,
spouses name;
b) Education
c) Reputation in your community, school, employment/jobs,
d) Current/ previous employers,
e) Civic, professional affliations.
B. Credit History
1. Creditors name/account/loan number.
2. Nature of account/loan (joint several obligations)
3. Type of loan, (installment or tear drops or revolving/merry go round)
4. Date account opened/established
5. Credit limit, terms, status
6. Current balance
7. Monthly payment current/delinquent
8. Payment history of account
9. Number of time(s) account reported of credit bureau data base
10. Whether account is disputed or not.
C. Inquiries made of you by other party
D. What your Credit Report say about you?
1. Credit information about you may be incomplete, inaccurate
2. Credit investigation agencies do not necessarily get their credit information from the
sources you may want them to get information from about you, no comprehensive
history of your use of credit.
3. Very few creditors are subscribers in a credit database company or does exhaustive
credit investigation thru credit bureau, collection companies.
E. How to read credit report about you

Rights of Person Under Credit Investigation

1. To know what your credit record says about you.
2. The right to be told by a credit bureau, the nature, substance, and sources of the
information a collected about you a credit bureau does not however, have to tell you
the sources of the information it used to prepare an investigative report about you.
3. To know the name and address of the credit bureau responsible for preparing a credit
report to deny you credit, insurance or employment, or to increase the cost of your
insurance or credit.
4. To review your credit report in person at the credit bureau ( by phone or by mail ).
5. To have a credit bureau investigate information in your credit report that you believe is
inaccurate or out-of-date . if the credit bureau deems your request frivolous or
irrelevant. The may not re-investigate.
6. To have inaccurate information in your credit record corrected, and outdated
information deleted if the credit bureau finds the information to be in error.
7. To have a brief written explanatory statement added to your credit file regarding
information in your credit record that you have disputed, but have been unable to
change or get deleted. Whenever a creditor, employer, insurer, and the like tells the
credit bureau that it wants to review your file, the written statement must be included
with the rest of the information in your credit file.
8. The right to sue a credit bureau in court if it willfully or negligently violates the law, if
you are successful in your lawsuit, you may collect damages.
9. The right to be notified by a company that it had requested an credit report on you.

Credit Investigation Agencies Services That May Affect You

1. Credit investigation reports on persons companies.
2. Property reports.
3. Skip/ where- about report.
4. Negative credit/ legal information on persons or companies.
5. Fraud detection data gathering.
6. Credit information interchange.
7. Account monitoring.
8. Credit risks scoring development.
9. Court records.
10. Bounced checks records.
11. Property appraisal
12. Delinquency/Bankruptcy Monitoring
13. Educational training
14. Consultancy
CAVEAT:
Its unlawful, immoral to knowingly or negligently provide, supply erroneous, malicious
information to credit investigation bureau/agency about a person under investigation.

What people hate about credit investigation agencies
1. Errors, inaccuracies in facts, information gathered about subject under investigation.
2. Mingling of credit information in other persons file with similar names.
3. Persons difficulty, inability to correct problem on their credit records.
4. Invasion of privacy through the gathering, storage, resale of credit information gathered on
persons.
5. Unskillful, artless, annoying credit investigation interviews.

CAVEAT:
To avoid, prevent, reduce error in your credit file consistently use the same name every time
you fill up an application for credit.
Common Errors, Mistakes in Credit Report
1. Mingling of credit records;
2. Name of former spouse appear on the credit report;
3. Misspelled name, wrongfully address;
4. Duplicate accounts wrongfully investigated;
5. Accounts information inaccurate, not up to-date, incomplete;
6. Obsolete information included;
7. Information gathered does not apply to you;
8. Unauthorized inquiry;
9. Failure to check, show than lien or encumbrance on property has been lifted/cancelled.


CAVEAT:
If you find inaccurate, incomplete, outdated information on you, call or write the bureau to
correct, rectify the error and update the information.
Effects of Tarnished Credit
1. You live on cash basis;
2. A credit card is no used;
3. Review, reassess your priorities and values;
4. Sacrificing in not having what you want;
5. Force to save;
6. Forego unnecessary things;
7. Credit cannot make all your wants, desire come true;
8. Credit is a medium you may use to inquire something really necessary and needed whenthere is
no other way to acquiring it.
How Soon/Late Do You start Rebuilding or Repairing your Credit
1. As soon as you have made arrangement with your creditor, lender and your credit woes are
behind you.
2. After a decided bankruptcy against you, you may start to have new leaf in your credit life.
Pragmatic Steps to Rebuild/Repair Credit
1. Have a doable limit on the amount of credit you apply for;
2. Canvass, compare price, terms and conditions for the best possible credit deal;
3. Secure credit for a specific purpose and use;
4. Gain the trust and confidence of your creditors, lenders and do it the old fashion way. EARN IT!;
5. Begin rebuilding trust, confidence in your community, office associations you are a member of;
6. Try, endeavour to have a face to face meeting with your past, present, future creditor.
Factors to Consider in Credit Repair
1. Be patient, persevering, it takes time to regain the trust, confidence of you past, present
creditor(s);
2. It takes on the average 2-5 years to rebuild credit;
3. You can speed up the rebuilding process;
4. Keep the barest minimum the credit you apply for;
5. Set doable steps to pay for credit obtained;
CAVEAT:
Irrespective of how you rebuild your credit, the objective is to avoid getting all the credit
available. Get only the one you really need and necessary.


Actions to Take Secure New Credit
1. Review your credit records with the credit bureau who investigated you for some
explanations, missing important positive information on you and offer an explanation
therefor;
2. Correct any error and add additional information if need be;
3. Earnestly, positively save even small amount a cushion that helps yous to avoid
temptation;
4. Keep trouble free any credit you have pending with other creditors;
5. Have a no-nonsense money management.
Actions to Settle a Credit Report Problem
1. Fill up accurately the investigation request form;
2. Send the filled up credit investigation form with accompanying letter and copies of
supporting documents to the credit bureau;
3. Request for the credit bureaus corrected credit report on you;
4. If the credit report on you is not corrected, go see your attorney for possible legal
action.
Ways to Avoid Credit
1. Home - rent, instead of buying on installments you can ill afford to pay;
2. Car live in a community with good public transportation;
3. Used car of friends, relatives are generally cheaper;
4. Participate in car pool;
5. Dont insist to get a car when your finances can only support a public transport.
CAVEAT:
Consult a reputable no-nonsense credit rebuilding consultant/company; Business Assistance,
Credit Corp., (Bagco Credit) the first one in the Philippines.

What is a Credit Repair Company
A new, developing credit service that is offered by person or company that specializes in helping,
educating assisting in the resolution, correction, rebuilding of a persons firms or business entitys credit
standing to be able to get anew into the financial main stream for credit.
In the Philippines, Business Assistance, Credit Corp., (Bagco Credit) is the Pioneer in the Business. Its
been in the credit and collection service industry for more than four decades now.

Services Offered By Credit Repair Company
1. Debt consolidation, restructuring;
2. Debt counseling education services;
3. Advise on the pros and cons of taking insolvency, bankruptcy proceedings to avoid
paying debts legally;
4. Corrects, rectify credit record problems.
Beware, Avoid Pseudo/Fraudulent Credit Repair Company
Its easy to notice and spot an illegitimate credit rebuilding, repairing firm/person. Dont fall into a trap
or be fooled by an illegal financial counselling/consultancy company or person.
Here are some danger signals not to fall a victim;
1. Extravagant, impossible promises to clear and clean your credit records;
2. Use of loopholes in the law to avoid legitimate bona-fide money claim against you;
3. Claim to get or secure your credit despite your negative credit records
4. Claim of being affiliated with creditors and the like.
DEBT FREE LIFE
How to Have a Debt Free Life
The avarice of people lead to their complicated lives causes by inordinate availment of credit for wants
and desires not for their real needs.
This situation of being neck deep in debts is motivated, aggravated by the economic fact of, many
people dont make enough money because a good majority of Filipinos belong to the poverty income
level aliping sagigilid or aliping namamahay that to make both ends meet they result to
unmitigated availment.
Debts are the biggest factors that influence the present status of the worlss socities for the last 60
years.
The average Filipinos is as indebted as the business because they are churning debt mediums to
sustain, expand, grow in their operation, existence;
Debts ever since have caused/aggravated inflation;
The government is the prime catalyst, motivator influencing people to go in debts;
Debts powers and aggravates inflation;
Debts is one of the major reasons for family problems, squabbles, separation, even commission of
crime.
The rich rules over the poor, and the borrower becomes the lenders slave
(Proverbs: 22:7)

Personal Traits that Leads to debt
1. Ignorance;
2. Immaturity (impulsive, jealous, envious, greedy);
3. Indulgence-compensation or matching the Joneses;
4. Poor financial planning;
5. Lack of confidence and insecurity;
6. Over ambitious;

Worthwhile Principles of Debts
1. Debt is not normal
Credit expansion is the fuel or power that gets the economy going/breaking;
2. Avoid Accumulating Long Term Debts
a. It causes prices to rise resulting to inflation
b. As prices rise, loans, mortgages period lengthens;
Inflation is the product of money supply via expansion of borrowed money.
3. Avoid Being a co-borrower or maker/guarantor on a credit if you can avoid it
4. Borrower has an absolute commitment to pay

Why You Should Get Away From Debt
5. To manage your finances and live within your means.
6. With discipline, positive desire and given enough time, you can be debt free.

Guidelines For Debt Free Living
1. Learn to Face Lifes (Marital) Realities
a. Discuss things and money matters
b. Work, live as a team
c. God will not listen to a husband who ignores his wife
d. No one can serve both God and money
e. No couple can keep their assets separated and live as one
f. Gross income is nothing. It is what you have left over what you spent that is important
g. People make money off the excesses of others
h. Prepare your work outside, and make it ready for yourself in the field; afterwards build your
house (Proverbs 24:27)

2. Prepare & Perform a Plan for Paying Debts
a. Avoid the rush, too much, too soon syndrome
b. Have less, controlled spending
c. Live within your means

A good name is to be more desired than great riches. Favor is better than silver and gold
(Proverbs 22:1)

3. Dont Use Leveraged/Borrowed Money For Speculative Risky Transaction
4. Have a Covenant to Repay Creditors/Lenders Faithfully
a. avoid egotism, irresponsibility
b. dont be insecure
c. to look up, hit the bottom first

Negligence that Lends to Debts
1. Avoid get rich mentality to govern decisions
2. Avoid risking borrowed money plan carefully and you will have plenty;if you act too quickly,
you will never have enough (Proverbs 21:5)
3. Understand first before getting involve
4. Stay with what you know best, and youll lose a lot less money
5. Dont be impulsive a faithful man will abound with blessings but he who makes haste to be rich
will not be unpunished (Proverbs 28:20)
6. Live within you financial plan or budget.
7. Accept responsibility for you acts of commission/ omission in financial transactions

a. sell what you actually dont need and live on, give money to your creditors;
Do not withhold goods from those to whom it is due, when it is in your power to do it. Do
not say to your neighbor Go and come back tomorrow I will give it when you have it with you
(Proverbs 3:27-28)
b. Go to your creditors and ask their forgiveness and work a repayment with them
8. Think, Plan and Act Judiciously;
For which one of you when he wants to build a tower, does not first sit down and calculate the
cost to see if he has enough to complete it? Otherwise, when he has laid the foundation, and is not
able to finish, all who observe it begin to ridicule him (Luke 14:28-29).

Temporal Desires that Lead to Debt(s)
1. Purchase of a House
a. Renting is better than owning
b. Poor management in general is the motivating factor to buy a house not within ones financial
means
c. The amount left after food in the average income of the Filipino does not warrant
buying/owning a house

The prudent sees the evil and hides himself, but the nave go on, and are punished for it
(Proverbs 22:3)
2. Vehicle Purchase
a. The price of a vehicle is already the price of a house today, which is a debt trip trap
b. If at all its a necessity to have a vehicle a used vehicle is a better alternative

3. Vanity Purchase
a. Purchase of jewelry, unnecessary clothes, shoes, applications, cosmetics, food items that dont
give positive advantage rather disadvantage
b. Vices, indiscretions and imprudence (impulsive buying)

4.Failure to provide for contingency expenses for; education, health and untimely death.

Advice on the Use of Credit Cards
1. Use your credit card to buy something you really need within your budget; not outside of it;
2. A credit card is not for a buffer:
3. Pay the credit bill in full each month;
4. The credit card is not an instrument for impulses buying:
5. The first, second month you find you are unable to pay the total credit charges STOP, using
your credit card.

*The credit card is not really the problem. It is your negligence, impulsive,
Imprudence use of the credit card that you to be in debt.


Credits to Avoid

1. Bank overdraft line;
2. Pawnshops, lending investor, finance company, unwarranted cooperative,
Credit union loans;
3. Equity loans;
4. Consolidated loans;
5. Surety ship or joint several credit or guaranty credit


Spouses Money Matters

Ascertain your financial compatibility quotient on;
a.) Money philosophy;
b.) Emotional baggage from childhood;
Have a doable expenses tracking system;
Know your spouses financial debits and credits before, during the marriage;
Have a regular money dialogues;
Respect each others autonomy about money matters that are not in joint account;
Apply / maintain separate credit cards with realistic credit limit;
Its healthy to discuss, disagree and agree on investment/temporal acquisition
matters;
Dont make salary a negative leverage;
Between you, transparency on money matters is best
Reference:
The Credit Repair Kit 3
rd
edition, John Ventura Publisher: Dearborn Financial Publishing
Inc., e, Chicago, Illinois
Debt is a Kill Joy
1. Its not how much you earned and make. It is what you set aside and save that counts and
matters.
2. Lowest savings rate;
3. Difficult moments generally is a catalyst for getting closer than growing apart;
4. Together, develop a new workable budget-and, STICK TO IT!
5. Avoid the shopping centers;
6. Dont be a Society Climber na obvious na Obvious (SCOO) by applying, accepting all credit
(cards) offered you- they give you man made MIGRAINE.
7. Avoid unmitigated consumerism;
8. If every person takes and consumes only what is needed, there will be fewer people in need
less social problem.
9. Tests whether buying on credit is for a need, want or desires;
A.) Do I really need it?
B.) Can I afford it?
C.) It is right me to buy
D.) Will or shall I use it?

10. Be a real person (man or woman)

a.) Face the music aftershocks of recklessness in the use of credit;
b.) Be pretty simple-an SCS (Society Climber Simple);
c.) Live within your means;
d.) Dont indulge in things toy really do not need;
e.) STICK TO YOUR BUDGET!

If you do all above you will see, feel, experience liberation from a BURDENSOME DEBT!