The extension of credit has been established for many companies and financial institutions in the instrument of penetration and market depth, and hence the source of increased risk of loss and impairment of assets, then the waves of uncertainty when you do not have the personal advice or to mitigate the risks of bad credit.

Credit Risk .- "It is the possibility of loss due to failure of the borrower or counterparty in transactions direct or indirect resulting from the non-payment, partial payment or lack of timeliness in the payment of the agreed obligations." (The important thing is to set the value at risk (VaR)) "

It is important that banks or credit must judge the solvency of their current and future borrowers and efficiently manage your portfolio, taking into account that "to extend credit" can engage in three types of risks: 1) Risk of illiquidity, 2 ) Instrumentation and legal risk, and 3) Risk Solvency. The first refers to the lack of money by the debtor to pay, reflecting the failure of not being able to make payment within the predetermined period or undertaken after the date that was scheduled under the contract. The second caution or lack of knowledge in the conclusion of agreements, contracts, preparation of promissory notes, bills of exchange, or legal instruments that require the debtor to pay (information asymmetry) and the third risk could be incurred for lack of real analysis and identification of the subject of credit that has no assets or collateral for the payment of its obligations. This requires that the following procedure is adopted for research and credit analysis, reflected in a scoring of CEDIT. (Record qualifying clients). This is the basis for developing the model to be developed by financial institutions under the New Capital Accord (Basel II). To identify the probability of credit risks; adapting widely accepted models.

Therefore lending institutions should establish efficient patterns of administration and control of credit risk that are discussed in the business, in resonance with their own risk profile, market segmentation with the characteristics of the markets in which operations and products it offers, so it is necessary that each institution develop its own framework, which ensures the quality of their portfolios and identifying, measuring, control / monitor and mitigate exposure to risk and the expected loss in order to maintain adequate coverage of, or technical heritage.

The methodology for the management and control credit risk phases: identification, measurement, risk control and monitoring are essential to mitigate the risks: (See Administration and control of business risks by Felix Campoverde)

The criterion for the formulation of policies for granting credit to conservative or liberal, should not depend on whims and will of the directors, but in many circumstances and situations: Credit by type of customers and products, profiles of the prospectus credit , endogenous and exogenous factors (market) of the lender, and that granting a credit implies the need to balance the imperative of investing in the customer (business view) and, secondly, increasing the financial needs and costs (economic view). Depending on the situation at all times and circumstances, the institution must establish conditions or other policies for granting credit. For example, interannual periods, depending on the seasonality of the product or depending on the economic situation. (If you recall the issue presented in administration and control of business risk analysis of credit remains quantitative and qualitative).

The symptoms and signs of the behavior of the credit portfolio is essential for the classification of current and future clients, this methodology and analytical techniques based on historic performance of credit operations and quotas, to determine the expected loss on Based on the probability of default, the level of exposure and severity of loss for calculation of these components must have a database of at least three years immediately preceding, containing sufficient information to calculate expected losses .

To calculate the expected loss should be considered such factors as: 1) Probability of default (Pi), 2) exposure level of risk (E), 3) recovery rate (r), and 4) severity of loss (1 -r).

Its formulation is: PE = E * Pi * (1 - r)

Understood:



Probability of default (Pi), is the possibility of occurrence of partial or total failure of a payment obligation or the breaking of a contract claim, a contractually specified period;

Exposure level of credit risk (E) .- It is the present value at the time of the breach in flows which are expected to receive from the credit operations;

Recovery rate (r) .- The percentage of recovery carried out on loan have been breached;

Severity of loss (1 - r) .- It is the measure of loss that the lender would suffer after making all efforts to recover funds that have been missed, at this time are executed or guarantees must be received as dation in payment. It is worth noting that the severity of the loss is equal to (1 - recovery rate);

Expected loss (PE) .- It is the expected value of loss from credit risk in a given time horizon, resulting from the probability of default, the exposure level at

default and severity of loss.

To mitigate credit risk is often borne in mind that through information obtained from the client and the business relationship is a series of alarms that should be investigated and tested successfully:

* Arrears in payment of bills.

* runaway expansion in a short time. - (You must check their financial capacity).

* orders over consumption.

* Request repeated renewals .- (Evaluate each petition demanding guarantees to them.)

* Non-payment of taxes and social security contributions.

* expenses disproportionate to the activity .-

* decline in the local budget.

* Other ...

Emerge from these specific provisions, the individual analysis of each subject, estimates of credit losses, which are formed on one segment of the portfolio, under the current regulations of each country. (Control Agency). "You can not measure what you do not know" why should be identified to measure the probability of default.

The executive of Credit as part of its operational process should always be considered:

* Each credit application is an opportunity.

* Do not prejudge, but listen with interest

* Give credit to the softness and humility (not to give it as a favor)

* Rules can enrich knowledge

* Ensure that the client knows the contractual deadlines.

* Be fair and consistent in terms of discounts and surcharges

* Do not allow the customer to bring the negotiating

* Ensure that the figures are correct

* Do not pretend to have knowledge that does not really have (ask, investigate and guide)

* Look at the tree (advantages and disadvantages of credit)

* Thinking that is not only good but easy recovery.

* Do not commit prematurely to the Customer

* Do not give hope when there are none.

* Do not attribute the rejection of credit to other people

* Never assume an attitude of flight to the customer.

* Accept responsibility and make decisions quickly

* Simplify customer operations

* Check frequently the policies and procedures as Collections and Credit laws.

Remember that the success of this loan in full recovery of investment, and for this we must mitigate the risks in the process of granting and recovery.

"A GOOD CREDIT GRANTED A CLIENT well served"

As we have seen, debt is a delicate matter that should not be irresponsibly. As is popularly said, is "a double edged sword" because it used the best way to give the many advantages and economic benefits that will allow you to obtain goods and services that improve the final status of life the individual, but used carelessly can destroy the debtor into an abyss of bitterness and difficult problems to solve.

Then explore a number of circumstances in which they generally can borrow:

1. Endéudese only if you have positive cash flow, ie their income exceeds their expenses. Ask your bank or at the approximate monthly payment amount that will generate its debt, and ensure that all its debt payments do not exceed 30% or 40% of their net income (depending on whether you are conservative or not), I particularly I prefer not to exceed 30%. Remember to set aside 10% of that percentage when you have chosen to variations in interest rates, and also, do not forget to save two (2) or three (3) wages as a reserve fund in a savings account or instrument (as I keep it personal three (3) prior to debt. Most other circumstances by which you can borrow subordinated to that you have done what is specified here.

2. Endéudese where the government or central bank of the country regulate interest rates.

3. Listen to programs where opinion interview renowned economists, often giving them advice about what people should do in the short and medium term from the economic point of view. In 2005 and 2006, it was common to hear economists recommend to people that borrow in the short to medium term.

4. Read market signals. While this is not a completely accurate law tends to give satisfactory results and of itself, interesting. When you see many commercial advertisements on television or the press, banks offering loans to fixed rate for the first 12, 24 or 36 months, is because they believe or expect that interest rates are going down. By contrast, when banks are offering fixed-term instruments is because they feel that interest rates will rise. Now here is a rough guide to wait a bit in terms of future interest rates.

5. Endéudese short to medium term, when you consider that interest rates for credit will be below the expected inflation for that year.

6. Endéudese to acquire assets. If you can buy assets through debt (let's say a building) and this will generate for example a payment of $ 500 a month, but will reward more than $ 500, say $ 700 for the rental income, then, that investment you will be generating income or net cash flows of $ 200. This result is enough to know that this investment is good debt.

7. Life and health are priceless, if you or a family member has a medical emergency, and unfortunately does not have an insurance policy or cash, it has no choice but to use their credit cards (on if you want the person who suffers is the emergency care in a private clinic). That is why it is always good to have an insurance policy for their personal and property (especially vehicles).

8. Endéudese if you work at a firm or company that offers preferential interest rates for their employees.

9. Endéudese if you have control over themselves and their finances. This premise is the most important of all, and you must be very responsible to take any decision of indebtedness. If in truth and with great awareness, you have control over themselves and their finances, be prepared to have and enjoy the goods and services with those who always dreamed about. Educate yourself on this, read about the issue, not only is this book and look for others to read and listen to the economists in the programs of opinion and the press. Try to understand and learn, get an expert, get a broad view about the finances and do things with consciousness. The bad reputation they have debts from people who decided to navigate these murky waters without having been prepared for them.

As consumers, we have many options for credit counseling, whether online or face to face with a credit counselor. The advantages of credit counseling at any stage of our financial lives is a benefit that we can not afford to lose.

1. What is Credit Counseling
2. Tips for budgeting
3. Making Financial Plans
4. Goal Setting Financial
5. Continue progressing financially
6. Attention to detail
7. Credit Management
8. Leave Your Mark
9. Work Toward Financial Freedom

1. What is Credit Counseling
Saving money is the goal of credit counseling. Credit counselors suggest practical solutions that everyone can follow. These include multiple ways to save money by starting and living on a budget and improving credit, consolidating debt management and setting financial plans and goals. A credit counselor can help consumers through a credit counseling service. Advice on credit is available to assist all who ask. Consolidated credit counseling is also available for those who have multiple loans or financial obligations. The repayment term consolidated credit solutions might be longer, but the monthly payments are generally lower than that associated with their original debt. Use caution if you want to choose your home as collateral for a loan and consolidate through a second mortgage. If you do not make your payments, you could lose your home. A credit counselor will give you practical solutions to their needs for payment of a debt. The consumer credit counseling is not very difficult to find. A credit counseling can help address the housing authorities, credit unions, universities, and military bases. Some may charge a fee for advice when you need a loan. If you are working with a program to help pay their debts, creditors can work with you on the decrease in monthly payments. Other sites can help you find a credit counseling on the Internet, through local offices of debt relief, by telephone, through your financial institution or consumer protection agency, and even through friends and family. Often, the best advice comes from someone who has recovered from a debt.

2. Tips for budgeting
When preparing a budget should consider all of their household income. This includes sources like tax increases, and bonuses. Then they should consider their expenses. A credit counselor may be the best source of help is that their costs fairly. Attending credit counseling sessions can be a valuable resource for all families and businesses. Must take into account your monthly bills such as mortgage payments, rent, telephone bills, including special expenses like movie tickets, salon expenses, and restaurants. Average number of times they go out to eat. This part of the budget can be very revealing, and many people find ways to reduce spending and start saving immediately. A list will help you weigh the differences between what they spend and what they are doing with the revenues. The budget is determined during a period of time determined by you. Advice on credit that can help you make a short term budget for a trial period or a long-term lifestyle change permanent. A credit counselor will guide you to deposit more in a savings account. Good credit counseling will require this practice, and some consumer credit can not have more than 10% of their income. The focus should be on creating the habit of saving, so some credit counselors suggest that you keep what you feel comfortable to begin. You can always increase or decrease the amount through time. If you are really serious about long-term plans, life-changing budget, then the service consumer credit counseling can help you with a detailed budget that do not put financial stress on you and your family.

3. Making Financial Plans
The first step in making financial plans should be to contact a credit counselor. He or she is an expert in credit that can recommend and provide the best and most professional advice. Your plan will include tips on managing your payments, as well as educate them on ways to save money. Your credit counselor to assess your current financial situation by examining your income and expenses. You must be honest and include all costs, even those that are not monthly, such as a vacation planned for the front more. Your credit counselor will use your list of financial resources and obligations to help you develop a strategy against creditors for payment. In some cases, can advise you see a file bankruptcy. In most cases, however, credit counselors try to avoid bankruptcy and will be an education for you and learn principles of money management. They can also help correct your credit report in a less dramatic presentation of the bankruptcy. A credit counselor may have you consider consolidated credit options as part of its financial strategy. The service consumer credit counseling can help you find the best plan for the consolidation of its budget based on your income and expenses. After a strategy is in place, your credit counselor will set financial targets that are affordable and realistic. The credit counselor has some financial goals and financial plans. The plans help you pay your creditors, while the goals help you live within your means and keep a well managed budget that you can live. This will help you develop lifelong learning practices that will be converted into good financial habits.

4. Goal Setting Financial
The financial goals requires a careful process with a credit counselor. Your credit counselor may suggest that budget planning can help in achieving their goals. The financial success will be the result of targeting, which should not be too high beyond what you can achieve, they have to be realistic. This is the reason why the consumer credit counseling is so important. From a goal is sometimes necessary when financial issues are needed to evaluate and repair. Some companies, such as "Take Charge America Online articles scenarios that may be similar to yours. Reading people's opinions can help encourage you when you set your financial goals. You will have good news every month if you follow their plans and achieve their goals. Track your progress periodically. The time it takes to become debt free are the emotional benefits of each succeeding month. To continue the monitoring and evaluation of credit with their advisor and review your goals when necessary. The life changes required to adjust the budget in their credit counseling sessions. Your credit counselor will be able to help you see that your savings are to derive maximum benefit. You can even choose to continue visiting your credit counselor who recommends a service on a regular basis by a number of years to ensure that the progress you have made will remain a permanent asset to your financial life and your financial freedom.

5. Continue progressing financially
Progress means you will maximize your savings while you minimize your debt with the help of your credit counselor. The credit counseling you receive will assist you in the long-term success, and work step by step progressive. It is easier to make changes to the principle that will become a positive part of your financial life later. Credit counseling is a tool and an asset. Continue building its slightly practical solutions for the financial progress. Your credit counselor will give you tips and guidelines, but you can also take advantage of their reunion to get real solutions. An important aspect of financial progress is to keep up and ahead even in the midst of life changes. If a baby comes, there is a union or a divorce or buying a new home, these changes will become part of your credit profile which advises aid. If you need advice on the consolidated loan assistance or simple strategies for budgeting, advice on consumer credit is always a source of the positive force that helps you when you need it. If you are behind in their progress. Even if you feel it takes a long time to recover, in fact that time is to their financial life. Find solutions to your credit counselor. The management of debt and remain financially strong sometimes requires help. Help is always a direct advice of consumer credit. The money savings is your ultimate goal, and train a credit counselor to help specifically on that. The process begins with the progress of credit counseling, and tools needed for success are in your hands.

6. Attention to detail
They include small details such as fees or shipping fees. Consider that you pay just send a payment. A credit counselor can help you create online payment options if you are not familiar with this. You will have the option of having your payments automatically deducted from your checking or savings account or you can make a one-time payments every month. You must weigh the options yourself and decide what is best for their lives. By sending payments through the postal service, will not only pay for postage, but also the risk that your payments arrive late. This in turn causes a fee to be added to your next bill. Your credit counselor can help you make these decisions, and weighed all the options. Balancing their accounts every month is crucial. There may be a method to balance exactly the penny or rounding to the nearest dollar. It is important that you inform your credit counselor about the method you use. Small changes can make a difference. When you go for credit counseling help, your credit counselor may suggest you balance the penny, if you have had difficulty controlling spending, even in small quantities. In general, the information must be presented when you bring your financial information in a session on the help of credit counseling. Some of the details can be found on websites, such as a clear solution of the debt. Examples of details of the debt amount and the time you have to pay their debts through various means.

7. Credit Management
Credit counseling may be helpful for the implementation of the credit. This class includes consumer credit repair or improve their level of credit account, use of credit cards, and knowing how much is going to pay when you get your statement. Repair your credit score requires strategies that a service consumer credit counseling can help you with that. There are several methods you can employ. One method may involve consolidated advice on credit. If a credit counselor advises you to consolidate your debts, then you're sure to find the best possible resources for you. Proper use of credit cards may also require help from credit counseling. Some people are frustrated with your credit history and make the decision not to use credit cards at all. The fact is that credit is necessary, because no credit is equal to bad credit. Using three to five different credit cards from major companies such as Visa or MasterCard, you will be able to rebuild your credit faster and more efficiently. Keep balances low and watch your spending. A credit counselor is a good source of support when you need to keep costs to a minimum. Take a credit card to help. Proper use is part of the credit counseling. Some people also believe that paying a credit card balance in full will be to their benefit. The opposite is true. Keep a small current balance on their cards. This is a way of demonstrating that you can handle credit well, and help you increase your credit score stars. The charge on the balance of interests will have the value of the bonus points you receive on your credit report.

8. Leave Your Mark
The hard work you do to be financially free, you must remember, your credit counselor, and your credit report. Do not take advice from an expert on credit is a tough job, and should always be rewarded for their efforts. Some awards will be imposed in a natural way, like the powerful feeling that will undermine their debts one by one. Time heals a credit report and stigma that can come along with debt. Credit counseling is so important, as is his checkbook. A good credit counselor will be patient, you have class, and understand your financial situation. You should feel comfortable in his presence and look forward to your consumer credit advice meetings. It's a feeling of freedom that you know that you will be debt free and that you achieved this by being educated by the best advice of credit counselors can offer. Afírmese and leave your mark on the desktop allowing credit counselor that he or she used as an example for others. You can indirectly help hundreds d person, simply by its success in the financial world. You will definitely leave its mark on your credit report once it is repaired and the progress is complete. Even if bankruptcy or poor credit accounts have been for years, you should know that nothing is forever and everything can be improved. The consumer credit counseling may be your best resource for such repairs. Credit counseling is not something to fear, but rather is a very good thing.

9. Work Toward Financial Freedom
Financial freedom can be a dream or a reality in various moments of his life. Credit counseling may still be a good resource. The key is to stay financially free. This can happen with a variety of methods. The investment is one where they can grow their savings in the long term or short term depending on the investment. There are risks involved that you should discuss with your credit counselor. A credit counselor can give you options to invest or can lead to additional resources once you are ready. Companies like "MetLife" offer educational resources on the Web that you can see while taking a decision. Insurance companies offer unique forms of investment such as annuities. His advice service on consumer loans may have more resources at hand in print or online. Pay is to work towards financial freedom. This ensures you have money for their needs and their children. The money for their children may be placed into a savings account or a checking account checks. This is a simple way to start saving. Another way to make the money work for you is to use the principle of reciprocity. When you give money, which can come back to you. This can be in the form of a tax write-off or otherwise, but this principle is used by people who are economically free and can be budgeted in your profile on credit counseling. Whatever method you choose, the use of educational resources that the consumer credit has to offer further advice can help you achieve financial freedom you deserve.