Businesses are getting tougher on managing Accounts Receivables. They are tightening credit standards, reducing grace periods, becoming more aggressive in collections, and generally becoming more conservative. This may seem counter-intuitive in a poor economy with so many people struggling to pay their bills. However, difficult economic times may be precisely the rationale for these actions.
The Days of Easy Credit have Ended
What this means for you is this: Unless you have stellar credit – a FICO score in the mid 700′s or better would qualify – you may have difficulty obtaining the best terms. Your interest will be higher, your limit will be lower, and you will be held on a “tight leash.” When you miss a payment, pay less than the full amount due, consistently are close to maxed-out, request extensions, or engage in other “risky” behavior your creditors will clamp down. They’re well aware of the “sub-prime” crisis and the negative implications for their business. Should you get in trouble they will send you constant reminders, call you incessantly and restrict your terms.
They Want to be High on Your List
Creditors are struggling to gain status on your list of priorities. If they are too liberal in managing their accounts receivable and credit policies they believe that debtors either will not take them seriously, or will stretch out or even defer payments. They know that many individuals and companies are in precarious financial circumstances. And, in the current economy the risk of default is higher than in prior times. This is particularly applicable to consumer debt.
Whether it’s credit card companies, utilities, service providers (like cell phone companies), lenders, banks, etc., they all seem to be getting tougher. It makes sense, of course. These companies are aware of the old adage “the squeaky wheel gets the grease” so they all want to squeak. They definitely want to see you up-to-date in your account with them, and increasingly they monitor your credit profile to see how you’re doing with your other accounts. Their knowledge of your bill-paying habits and your risk profile provides important data for their business decisions.
What Should You Do?
In view of this changing credit landscape what should you be doing?
- Limit your use of credit
- “Deleverage” i.e., reduce your outstanding debt, particularly high interest rate obligations
- Pay your bills on time
- Prioritize your bills. You know what’s most important to you. Don’t be manipulated by your creditor’s priorities and demands
- Make arrangements as soon as you know you have a problem, and honor your commitments
- Don’t get depressed, overwhelmed or hide when financial difficulties strike
- Become more informed – A smarter consumer!
- Unless you’re borrowing from the Mafia you still have consumer protections and recourse in this country; remember that!
- Seek help and advice as necessary
