In our ‘Make Credit Work For You’ post this week, we look at what you should do to recoup those financial losses over the Christmas period which are seeing you struggling with debt and that may have already impacted your credit rating this January. The below story by Karina Barrymore was featured in The Daily Telegraph and other publications this Sunday, and features comment from debt and finance experts including myself, Dun & Bradstreet CEO Gareth Jones, and Financial Counselling Australia’s Brian Harvey. I hope you find some helpful tips to assist you in getting your head above water with credit.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repair, www.fixmybadcredit.com.au and www.facebook.com/FixMyBadCredit.com.au.

How to cure Christmas credit hangover

By Karina Barrymore Jan 13 The Daily Telegraph

There are not quick fixes for a festive debt blowout.

OK, DESPITE the good intentions, the spending urge somehow got the better of you and you’ve blown the Christmas budget. Christmas credit card bills and bank statements are about to arrive, so how do you cure a seasonal debt hangover?

Unfortunately, there’s no gain without pain when it comes to getting back in the black. Here are the top tips from debt and finance experts for easing that pain in the purse.

The debt collector Credit reporting agency and debt collector Dun & Bradstreet says the worst thing anyone suffering a new year debt hangover can do is ignore the problem.

“We often see a spike in defaults in the first half of the year, which results from credit used over the Christmas period,” Dun & Bradstreet chief executive Gareth Jones says.

“Apart from causing financial pain, this situation can also impact people’s ability to access future credit as the default stays on a credit report for up to five years.”

His top tips are:

Close any bank accounts or credit facilities that are not essential.

Don’t ignore letters or phone calls about debts. If you owe money, the best thing you can do is repay it.

Pay attention to all your bills and pay them in full and on time.

Avoid borrowing money to get out of one debt, and don’t use one credit facility to pay off another.

The credit file manager Credit file advocate and repair service MyCRA says at this time of year fraud and identity theft is also higher.

“The increase in credit usage in general can also mean issues like identity theft, financial hardship and basic credit reporting mistakes can be more prevalent at this time,” MyCRA chief executive Graham Doessel says.

“An important part of curing a post-Christmas credit hangover is to take stock of what is said about you on your credit report. There is the potential for errors to be present on your credit report. Mistakes can and do happen but the responsibility for checking your credit file rests with you.

“Most people don’t realise how easy it is to obtain a default. If any credit account has been left unpaid for greater than 60 days, the creditor can list the overdue account as a default on your file.

“Often we see people in the new year who have missed paying a phone bill during the Christmas rush, then gone on holiday for some time, apply for a loan in the new year and are shocked to find they have a bad credit rating.”

Doessel says now is the time to check your credit file.

You can receive a free copy from most credit reporting agencies within 10 days or you can pay a fee to receive it sooner.

If you have negative listings, defaults, writs or judgments, which you believe are errors or unfair, you have the right to have these entries rectified.

Advisers and counsellors Financial advisers and counsellors say the first and best thing to do if you are in financial strife is to seek support.

“Act quickly and ask for help,” says Financial Counselling Australia member Brian Harvey. “Speak to a financial counsellor, family, partner, your bank.

“If people are left with post-Christmas debt, they should contact their providers as soon as possible to let them know they are having difficulties. They can then set up an affordable repayment arrangement, which will involve them first working out what is affordable. Often people put off dealing with the debt as long as possible, during which time it often grows.”

Hewison Wealth adviser Glenn Fairbairn says sometimes refinancing your credit card by seeking a lower-cost loan can ease the repayment burden, or allow you to get ahead because you’re paying less interest.

“It is important to prioritise the repayment of any outstanding credit card debt, even if this means cutting back on discretionary spending. Cut up your credit card. This will ensure that you don’t do the same thing again next year.

“And start planning for next Christmas now.”

The legal centre “Get on the front foot and seek assistance,” Consumer Action Law Centre spokesman Daniel Simpson says.

“If you put off getting help, you’re only going to fall further behind.”

“The first thing you should do is pick up the phone, call the credit provider.

“Think twice before hiring a credit repair or budgeting service to help you. These companies make it sound easy and pain-free to repay your debts but they usually charge a significant fee.”

If you’re in credit strife

* Don’t ignore the problem. Be proactive and ask for help.

* Act quickly and let your creditors know you are having trouble. Ask for a new repayment plan if you need to.

* Start to repay a little, even $10, over and above the minimum repayments.

* Set a strict budget, including all your repayments and bills before other spending.

* Cut up all your credit cards.

* See a free financial counsellor, phone 1800 007 007 for an appointment.

* Be aware that budgeting companies and credit repair agencies charge a fee.

The message to not bury your head in the sand, and to get on top of your debts early, can’t be stressed enough to avoid getting into hot water with defaults on your credit rating.

However, it is important to know that credit repair and budgeting services are different entitites, and do different things for you. Credit repair is generally not a budgeting service.

What is credit repair?

A decent credit repairer addresses credit rating inconsistencies by auditing your credit file and customer information to find areas of non-compliance by your creditor which may see your default or other negative credit listing removed from your credit file. It is useful for those people who believe their listing is unfair, contains errors or is unfounded (or those people who want to check the lawfulness of their credit listing).

You may dispute inconsistencies on your credit file yourself, and this is free. But many people choose to use a professional credit repairer to work on their behalf because they don’t have the time, and most importantly because they find the process incredibly difficult. To ensure successful removing of a credit listing from your credit file, you must prove that your creditor did not comply with the law when placing the default or other listing on your credit file.

So its more involved than just showing right and wrong, it has to be demonstrated according to the law. We liken it a little bit to defending yourself in Court. Sure – you may be able to defend yourself, but your case has much more chance of success if you use a legal professional.

For help to obtain a copy of your credit report, and advice on how to tackle your credit rating defaults contact a MyCRA Credit Repair Advisor on 1300 667 218.

Image: Grant Cochrane/ www.FreeDigitalPhotos.net