Disadvantages Of Credit Management

Making mistakes when it comes to your credit is a lesson that many people learn the hard way. Constant phone calls, mail, and threats can make a tough financial situation worse. Either how well or how poorly you manage your debts and finances are available to creditors to see when you apply for credit, such as for a retail store card, or even an auto or home

After reading the Fair Credit Reporting Act’s table of contents, my first impression is this law’s main purpose is to protect the consumers’ privacy. I can see it mentioned consumers many times, such as “Requirements relating to information

I work as a Credit Representative for Graco Inc, a Minneapolis based company. Graco Inc is a manufacturing company provider of premium pumps and spray equipment for fluid handling in construction, manufacturing, processing and maintenance industries. As a Credit Representative, we handle both the Credit and Collection functions. In Credit, customers are evaluated on their credit history based on financial statements, credit reports and trade references to determine the financial risk. Our goal is to support sales by extending credit and terms to customers. On the other hand, as Collectors, we perform collection efforts to ensure accounts are paid on time and resolve any outstanding balances. Customers whom tends to struggle on payments and pay late on their bills, our leverage is to hold orders to collect debt.

We collect, hold, use and disclose personal information about you (including information required to comply with Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), the National Consumer Credit Protection Act 2009 (Cth) and the Personal Property Securities Act 2009 (Cth)) to: assess and process your application; provide you with, manage, audit, evaluate, improve and develop product or services; notify a credit reporting body or other credit providers of your payment history or any default by you; conduct credit scoring; model and test data; communicate with

As with any financial information collected we need to ensure that the customers information is kept safe and secure and the information we gather follow the proper collection regulations. We need to disclose to the customer the ways we intend to use the information, such as running credit checks or opening lines of credit. Prior to the customer submitting any information we need to ensure that we disclose this information.

Consumer Rights & Reporting Regulations," n.d.). Anytime an individual applies for a line of credit, it is important to review the consumer’s credit history, to see the accounts they have had in the past, and also the accounts they still have, how they made their payments, whether they’re on time or if any were late. Using this information will allow the creditor to give the consumer the right type of

It is imperative that young adults comprehend the facets of obtaining and maintaining proper credit in order to sustain a sound credit history. For example, the most widely used credit score is Fair Isaac Corp.'s FICO score, which ranges from 300 to 850. A FICO score of 760 or higher reveals an individual’s respectable borrowing power, for even a recently reported late payment can have a substantial effect on a credit score (Holmes). In addition, young adults can learn the importance of securing proper credit and increase their attractiveness in lender’s eyes by aiming to use less than 20% of one’s available credit (“Get”). Since lenders pay close attention to the amount owed on credit cards relative to the limits provided, lenders are able

The use of credit reports is an essential step in establishing an appropriate credit-granting system. The presence of these reports would indicate that the control procedure is operating efficiently. If the reports are missing or

These federal and state laws impact financial organizations in a few different ways but generally revolve around three functions: confidentiality; integrity; and compliance through audits. FACTA includes requirements for protection of consumer data including social security numbers, and credit card information. It also contains provisions for data integrity with consumer reports and disputes. SOX requires publicly traded organizations to conduct annual assessments of their audit controls to the government. Additionally they must be audited by an external third party. SOX is designed to protect investors from fraudulent financial reporting from the organization. GLB requires financial institutions to protect the privacy and integrity of their customers ' information. Additionally, the companies must implement fraud protection programs to prevent unauthorized disclosure of customer information. Regulation E has rules and restrictions for electronic funds transfers, and creates requirements for information disclosures, and records retention. FRCP outlines requirements for the collection, retention, and production of data that could be required for discovery for a civil lawsuit.

Truth in Lending Act or Consumer Credit Protection Act is a law established to promote informed use of consumer credit by disclosures about terms and interests.

Lag between time when they are paying their suppliers and employees versus time it takes to collect receivables from customers (30-60 days)

This analysis would benefit from the addition of more variables. The addition of variables would allow a more accurate study. These variables should also being broken down into several data elements. Some suggestions for variables for future analysis include the discount for the bill purchased and a variety of account demographics. These demographics might include credit status, geographic location, bankruptcy/foreclosure, net worth or net income. This study should also be for a longer time period. The additional variables would identify the greatest possible accounts with the shortest time for collection.

It's also important to understand when these transactions are taking place. There is the chance that a customer has bought an item but takes a long time in paying it off. Although you might have made a  profit on the sale of the item, there is a cash flow gap as you have not yet received the funds to pay for the item yourself. Simple things like can put smaller businesses in a lot of financial trouble. This cash  flow gap could damage credit ratings, miss other opportunities, and force the borrowing of funds.

Another strategy commonly used is 'Discounts for the early payments', This is where a business may offer discounts to account customers for the early payment of their accounts to speed up cash inflow. This discount may be a little as 2-5%, but shows effective in terms of cash inflow as it gives incentive for the customers, Giving both the customer and business a gain in the financial situation. Other incentives for early payment could include small gifts and discounts on future orders that the customers may have. The business then may shorten the credit terms it allows for account customers. Thus Reducing the number of days that a customer can take to pay its invoice, this will speed up cash inflow into the business as it recieves cash from its sales much sooner.

As technology improves, the wide use of “hard information”, such as the borrower’s credit history, reduces informational asymmetries. Therefore, long-distance small business lending is easier (Frame, Srinivasan, \& Woosley, 2001; Petersen \& Rajan, 2002). However, even with the use of credit score data, collecting ``soft information" still helps local lenders control risks to avoid delinquency (DeYoung, Glennon, \& Nigro, 2008) and provides informational advances in offering more favorable rates (Agarwal \& Hauswald, 2010).