Tuesday, March 9, 2010

Would A Bank Sleep With You? Understanding Credit As A Relationship

Throughout my years working as a banker, I found out an interesting analogy between your credit behaviours and how ones can manage his/her relationship. Today I will write a 25 years old man; Stephen (the customer) and a nice young lady of the same age; Lara (the bank). In this first part, I will write about building this relationship. On part two, I will explain how people can ruin it. So let’s see what happens when Stephen meets Lara. Remember, credit is all about trust. relationship
Don’t try to sleep with her the very first night (credit history)If Stephen is trying to hard on the first night, Lara may be scared and may want to put an end to the relationship before it even starts. When you have no credit history and you are trying to get a credit card, a car loan, a mortgage and a flex line for your renovation at your very first meeting at the bank, you will be declined in a heart beat. Bank, just as Lara, likes to know more about who they are dealing with. Some banks might lend you the money without any questions on the very first date, but be careful, you might end-up with a huge bills in interest and other charges. Those kind of girls are expensive and so are banks.

Be a reliable friend (experience with other lenders)

Let’s assume that Stephen is a real gentlemen and that he did not try to push things with Lara. After a couple of dates, Lara is starting to get interested in Stephen. This is when she will ask her friends and maybe his friends to know more about him. She will pull out his “relationship bureau” to see if he had any issues in the past. Lara is not necessarily looking for long term relationship with his ex-girlfriend but more about his trustworthiness. By asking friends about their perception of Stephen, Lara will have a good idea if Stephen is reliable, honest and sincere.

Be on time, buy flowers, be consistent (general credit behaviours)

Stephen is now in a relationship with Lara (man, it’s not an easy job to keep her happy!). They have been together for a few months and things are going good. Stephen is never coming late from work and he his always ready when they have to go out. He buys her flowers and other nice gifts for her birthday and other occasions. But the most important part, he is honest and consistent. Lara truly believes him and he says that he loves her. Fortunately, banks are not that demanding ;-) In fact, they just want to make sure that you are making all your payment on time and that you don’t lie about your source of income and your assets. As long as you can proof that you are a honest man, both Lara and the bank will trust you back.

As you can see, building a strong credit score is not that hard. It requires time, consistency and honesty. I admit that human relationships are more complicated. But in the end, it all comes down to trustworthiness.

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