His credit score It could be affected by a multitude of factors such as customer product retention, repayment discipline, credit utilization, loan size, loan type, and length of credit history. It is important to understand some of the myths that come with credit scores in order to make informed decisions.

INCOME AFFECTS CREDIT SCORES

No, income does not have a direct impact on your credit score, but it does play a role in your loan and credit card eligibility. Income and salary are measures that are considered for a consumer's ability to repay loans. "A consumer with high income but not disciplined in repaying loans may have a lower credit score compared to a consumer with relatively lower income but more disciplined in repaying loans," Singhal said. Adhil Shetty, CEO of Bankbazaar said that the credit score reflects the amount of credit that is used compared to the total credit limit and how well that credit is managed. "Despite facing a loss of income in part or in full, if you are able to pay your dues and EMI on time, your credit score will not suffer."

NO LOAN MEANS GOOD CREDIT SCORE

It is not true at all, because if there is no loan it means that you do not have a credit history. The credit report looks at how you manage your credit, and the absence of it means there's no way for a lender to understand your financial behavior. Therefore, taking out a loan could become a challenge in the absence of a loan. “You could face challenges using any line of credit if you don't have a credit history. The best practice is to build a credit footprint ensuring timely payment,” Singhal said.

MULTIPLE LOANS MEAN A LOWER CREDIT SCORE

There is a fine line here because multiple loans could mean you are starved for credit and multiple credit inquiries can have a negative influence on your credit score. However, the credit score is affected by the ability to repay the loans and not by the number of loans. If you have multiple loans in your name but manage to pay them off on time, you could have a higher credit score compared to someone with fewer loans but no good payment history. “If your credit utilization is low and if you are able to make all payments on time, then your credit score It doesn't have to come down," Shetty said. Keep in mind that having multiple active loans could increase the burden, which could affect the timeliness of payments.

MULTIPLE CREDIT CARDS MEANS A BETTER CREDIT SCORE

Understanding that too many credit cards means more credit availability and therefore less utilization. For example, if you have six credit cards with a credit limit of 50,000 each, your total credit limit would be 3 lakhs. If your average credit utilization is 1 then your utilization is 33% and Shetty said that this is a good number. However, having multiple credit cards could mean multiple bills and multiple payment dates, increasing the chance of default. “The more cards you have to control, the more likely it is that you will forget a payment, which will affect your credit score. Have only as many cards as you can handle. Don't go overboard with that,” said Wilfred Sigler, director of sales and marketing for CRIF High Mark. Singhal said having too many lines of credit, even if they're not used, can hurt an individual's credit score by making them appear risky to lenders.

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THE DEBT PAID WILL NOT BE REFLECTED ON THE CREDIT REPORT

Keep in mind that credit reports track your credit behavior for two to three years, and therefore any loans you've had or closed during that time will show up on your credit report and therefore affect your credit rating. credit score. If there were any delays in paying your debt, it would be reflected in your score. Sigler said all of his accounts would appear on the report regardless of whether or not it is paid in full.

EMI MORATORIUM WILL IMPACT CREDIT SCORE

In case you opt for the moratorium on term loans to face any liquidity crisis you may be facing due to covid-19, know that it will not affect your credit score as long as the data is communicated by your bank. However, Singhal said the loans will continue to attract interest even during this period and his total indebtedness will increase, which could affect his eligibility for new loans. As long as it doesn't hurt your credit score, the reality is that you won't be able to get new loans. It is advisable to follow up on your credit report from time to time.

Following the coronavirus lockdown, many business owners are under immense financial pressure caused by the economic impact of a near global standstill. Some may be in or at risk of default or default. Creditors may be trying to get a payment and exert pressure through lawsuits and threats of legal action.

Meanwhile, for many professionals, such as doctors, dentists, technical specialists, and professional consultants, the value of their businesses is often tied much more to their personal services and goodwill than to their hard physical assets. For these owners, go out of business It can mean leaving heavily leveraged or leased equipment with the opportunity to bring your licensed skills and talents into a new business.

Business owners in debt often ask me if they can just close an existing practice in deep debt and open a new one. The answer, in some cases, is yes – but it should only be considered by the right people (those whose debts don't follow them) and done the right way.

DON'T DO THIS
An example of what not to do is found in an old Florida case, Munim, MD, PA v. Azar, MD Defendant's medical practice was sued for breach of contract and lost. Twelve days after a judgment for a substantial amount of money was granted, the owner-physician incorporated a new practice, stopped seeing patients and providing medical services at the old practice, and immediately began seeing patients at the new practice. The new practice was in the same office building, used the same furniture and equipment, employed the same manager and office staff, and served the same patients. The new office was simply a reincarnation of the old one with a new hat.

The judgment creditor followed the new practice based on a fraudulent transfer of assets, a de facto merger and the mere continuation of the business and won. Consequently, the creditor was entitled to enforce the original judgment (issued against the old practice) against the new practice of the doctor.

With a more strategic approach, the result may have been different.

Instead, start with a detailed analysiseither
Although it may be tempting go out of business riddled with debt and starting anew, such a drastic measure should not be taken without carefully evaluating the personal risks and long-term consequences. Bankruptcy, whether business or personal, may be an answer for some, but many professionals may want to avoid personal bankruptcy for fear of the effect on their license, credit, reputation, and other long-term implications.

Instead, strategic resolutions are often plausible. In my experience, most reasonable creditors would prefer to work with historically strong borrowers, lessees, and tenants for long-term success. Here are some steps that business owners, particularly those in healthcare or other professional service practices, should take when considering their options.

Read More: What to do if you have used your savings during the pandemic
Conduct a business exposure analysis
First, assess the financial obligations of the company. What are the ramifications if those obligations are not met quickly? Can the practice continue to work in the short or long term? What solution options -such as the extension of deadlines, leniency, renegotiation or other more creative alternatives- can exist? For example, will the owners move to evict, or will the equipment be seized or repossessed, or will creditors be able to pursue other options, which may involve modifying existing agreements?

Business owners should have already created a separation between business and personal interests and assets. Proper use of legal entity structures, such as corporations, limited liability companies, and professional associations, often insulates business owners from the personal obligation to assume business responsibilities (except in cases of misconduct or misconduct). professional practice).

Assuming that the company operates as a separate entity, the possibility of a liquidation of the company with a fresh start can be considered. This further depends on the extent to which the individual owners are liable for the debts of the business, rather than go out of business.