MyCRA Specialist Credit Repair Lawyers

Tag: late payment notation

  • New credit laws: the single best thing you can do to prevent bad credit

    change attitude to billsChange your attitude towards paying your bills, and change the likelihood you will suffer from bad credit. That is the single best thing you can do to prevent bad credit in the form of defaults, and now, the dreaded late payment notation. It’s not rocket science of course, but changing your financial attitude and stopping the crazy juggling act is one of those things I have seen in my time that most people on the slippery financial slope don’t do, that they could do to get themselves on the road to long term financial recovery long before they have defaults. Without defaults or late payment notations on your credit file, you score much better in the lender’s systems. You have a much better chance at securing credit in the future, including major credit like a home loan.

    By Graham Doessel, Non-Legal Director of MyCRA Lawyers www.mycralawyers.com.au.

    Although we would like to believe that the credit system is foolproof there are always going to be instances where Credit Providers make mistakes, and you cop bad credit unjustly or incorrectly. That you can’t help. T

    he type of bad credit I’m talking about is the bad credit which is directly attributed to you not paying your accounts on time. Instances where it’s either entirely or mostly your fault.

    With our new credit laws in place, it is quite likely that at some point most Credit Providers holding an Australian Credit Licence (eg banks and building societies) will sign on to comprehensive credit reporting and be able to access and report on your repayment history. So if you’re late by more than 14 days paying your credit card, personal loan or home loan, you run the risk of having a late payment notation recorded on your credit file and remain there for two years.

    A story yesterday from the Brisbane Times, Telcos and utilities could suffer under new credit rules quotes the Australian Retail Credit Association (ARCA)’s Damian Paull. ARCA are the guys that devised the Credit Reporting Code of Conduct, to go with our new Privacy Laws. Mr Paul said there is a danger that banks who chose not to report consumer repayments information and telcos and utilities – which are excluded from the new regime – could find there is a financial impact.

    “Once consumers get a sense of who is reporting, what’s going to happen?,” he said.
    “If I know bank X is reporting and Bank Y isn’t, what is going to happen to banks who do not report that information? What is going to happen to telcos and utilities?
    “Is that going to put pressure on these organisations and their payments – I think this is probably going to happen,” he told a conference organised by Informa in Sydney on Wednesday.

    These comments worry me, because it tells me that it is predicted that people who are struggling with their repayments will simply make their loan and credit card repayments on time, but miss the mobile or energy bill, because those are not subject to repayment history.

    Whilst this may be true, as someone who has been involved in the finance sector a long time, it is not a sentiment I want to accept.
    Fair enough, some months you may be a little short on cash. Yes, to avoid repayment history, you may want to pay your credit card, but leave your phone bill.

    But for those people who are consistently unable to meet all of their repayments on time – there was no mention in the article from any of those commenting, of what they should do, to get back on track.

    By acting early and taking advantage of new financial hardship laws, you can save yourself from mounting debt, late payment notations and defaults.

    If you are suddenly unemployed, fall ill, separate from your spouse or have a period of intense debt stress – you should know there are laws that may be able to help you through this difficult time. By putting your hand up early– before your accounts go into arrears – you could save your credit file. But why are there not more people aware of this?

    Time and again, I see people burying their heads in the sand, robbing Peter to pay Paul, until they are in so much debt it slaps them in the face. You should know that a bump in the road doesn’t have to mean you can’t borrow again, so long as you handle it the right way.

    New financial hardship laws brought out by the Government last year have been designed to protect consumers during times of temporary financial hardship.

    Last year, Steven Münchenberg, Chief Executive of the Australian Bankers Association, said in a statement to the media that only one in four bank customers knew that banks offered hardship assistance.

    As a company involved in credit dispute, MyCRA Laywers has helped many clients in the past dispute credit listings issued during a time of financial hardship.

    If the powers that be played a more proactive role in credit education, this issue would no longer be as prevalent.

    In the past consumers have not been offered hardship variations with their bank, or they have not been aware they have a right to request one and have been defaulted – this locks them out of mainstream credit for five years. If you are largely aware of your rights and obligations, then you might request a variation to your credit agreement early and potentially avoid the long term pain for what is often a very temporary issue.

    The earlier you act, the better off you will be. The key word here is ACT. Don’t hide from your Credit Providers and hope it will all go away. It never does.

    If you are experiencing temporary financial hardship you contact your bank or building society and ask to speak with the Financial Hardship Variation Team. Using the specific words ‘financial hardship’ will help make it clear to the bank what you need. Ideally, act before you fall into arrears on your account – to save your credit file when you recover from this difficult time.

    If you’re not at the point of needing a specific hardship variation with your bank, but you still struggle from time to time – don’t wait till everything goes belly up. There’s plenty of help out there for people who aren’t great juggling their finances or have found themselves over-committed. There are free financial counsellors out there who should be able to help you. Contact the Financial Counsellors of Australia www.fca.org.au for more help.

    Image: Danilo Rizzuite/ www.FreeDigitalPhotos.net

  • Could carry-over credit card debt be the undoing of many a home loan?

    carry-over credit card debtIn my recent guest post for broker publication The Adviser, I discuss repayment history and credit card accounts, looking at how Australia’s new credit laws could change the playing field for borrowers and brokers, and how repayment history could impact credit ratings and the approval of home loans. 

    By Graham Doessel, Non-Legal Director MyCRA Lawyers www.mycralawyers.com.au.

    You can read my guest post from The Adviser in full below:

    Could carry-over credit card debt be the undoing of many a home loan?

    Australia’s new credit laws will place late-paying clients of licenced credit accounts such as credit cards and loans on the ‘naughty list’ if they are more than five days late with repayments.

     So who’s going to be most at risk of getting a late payment notation?

     In our experience, those with carry-over credit card debt, as well as those people with multiple credit cards could be most at risk.

     Certainly, when assessing clients who present with bad credit, we find a significant number of clients with defaults who have carry over credit card debt and/or are juggling multiple credit cards and other debts in arrears.

     These people are more likely to default because they have undertaken too much credit, often leaving no wriggle room for when life throws them a curve ball. Death, divorce, unemployment, sickness and relocation can all create that upheaval which leads to chaos with finances. If someone in the throes of a chaotic event is unable to pay an account and it falls more than 60 days in arrears, they can have a default placed on their credit file.

     In the case of repayment history, it’s going to take much less of a curve ball to make a dent in the credit file. Australia’s credit reporting system proposes to tackle the over-commitment issue with the inclusion of repayment history information to an individual’s credit file. If a client gets more than five days behind in their credit card or loan repayments, their repayment history may show up on their credit file.

     Those people robbing Peter to pay Paul – running from one repayment to the next, but never quite getting far enough in the red to cop a default on their credit file – are just the type of credit users big brother is hoping to catch out with repayment history information. It will mean people with bad habits when it comes to credit are going to be stopped in their tracks, and, eventually, won’t be able to take out major credit such as a home loan.

     Too many late payments will be used to assess increased risk of default even when a default is not present on the credit file.

     So how many people have carry-over credit card debt?

     A recent survey conducted by Roy Morgan for ASIC shows that around 2 million Australians do not pay off their personal credit card debt in full each month, rising from 24 per cent of personal credit card holders in 2009 to 27 per cent of personal credit card holders in 2013.

     Another recent survey showed the volume of Australians worried about their finances. Mortgage Choice revealed in its Money Survey last month that 53.4 per cent of people surveyed were “very worried” or “concerned” about their financial situation. The survey also found that 55.5 per cent of the respondents had credit card debt, with 45.7 per cent of them owing at least $4,000.

     The fall-out goes to the uneducated

     No one is immune to incurring late payments on their credit file, and the fear is that clients who don’t fall into the category of the overcommitted could also be tarred with the same brush. Those who are more than five days late because their bill goes missing, or who stay a little too long on holiday, or just get busy and forget to pay are going to be tarnished as a late payer.

     And it seems that most people don’t know they run the risk of this. Recent statistics from Veda Advantage revealed that the majority of Australians do not know they can be penalised for making a credit card or loan repayment late. Statistics show that seven out of 10 Australians don’t know about Australia’s new credit laws.

    How many late payments will lead to the declining of finance approval is up to individual lenders to decide. What we fear is that even one or two late payments over 24 months could change the interest rate offered.

     How will the new laws change the credit landscape?

     Not every licensed credit provider will be taking comprehensive credit reporting on board, and some will take a while to apply the changes. But what we do know is the shift to the new system is being encouraged by those within credit reporting, with a probable take-up by most licenced credit providers within the next 24 months.

     Brokers may find there’s a teething period in the future, as lenders change the way they assess credit worthiness based on the new available information. What was once accepted by the top-tier lenders could now be declined.

    My advice to brokers? Having knowledge of a client’s repayment history as well as any other adverse listings prior to making an application can help match the right product to your client. It may be a good idea to encourage clients to get a copy of their CRA, and even showing them how easy and quick it can be to obtain their credit report could be beneficial to everyone in the qualifying process.

     Clients can obtain a free copy of all their credit reports from www.freecreditrating.com.au.

    * N.B. Since last Thursday, the grace period for repayment history has been officially extended to 14 days. See today’s post ‘Late payment grace period extended to 14 days’ for more details.

     If you would like to know more about your credit report, or need to dispute a credit listing on your credit report you can contact MyCRA Lawyers on 1300 667 218.

    Image: Gualberto107/ www.FreeDigitalPhotos.net

  • Why you really don’t want to be late with your credit card

    repayment history informationDo you have a credit card that you regularly let loose on? If you have trouble paying it back, you need to know that big brother may be watching YOU! Australia’s credit laws have just had a major overhaul. One of the biggest changes affecting you will be that your repayment history on accounts such as your credit card may show up on your credit file. This could impact you and your ability to obtain credit. We look at what you need to know about your repayment habits, and give you some tips so that you may be less likely to be caught out with bad credit.

    By Graham Doessel, Non-Legal Director of MyCRA Lawyers.

    The lowdown on the new laws…

    From March 12 2014, your repayment history on licensed credit accounts (this includes your loans and also your credit cards) may show up on your credit file and remain there for 2 years.

    An account of this type more than 5 days late could be recorded late by your credit provider, if they decide to take up the new credit system.

    Here is some information on repayment history information, set out on the Office of the Information Commissioner’s website:

    What is repayment history information (RHI)?

    RHI is information about whether you have met your consumer credit payment obligations. Consumer credit is credit that is intended to be used primarily for personal, family or household purposes.

    RHI includes information about whether you have made a payment on time or whether you have missed a payment. If you only pay part of the amount owing, you are taken to have missed a payment.

    RHI includes the day on which a payment is due, and if you made a payment after that day, the date on which you paid. Therefore, RHI can include both positive and negative information about your credit history.

    It does not include the amount of any missed payment — only the fact that you have made or missed a payment.

    What types of payments could be included in my RHI?

    RHI can include information about any consumer credit payments that you make, or fail to make, to a credit provider that holds an Australian Credit Licence.

    This means that RHI will usually reflect made or missed payments on a loan or credit card.

    When can credit providers begin collecting RHI?

    RHI can only relate to payments that you have made or missed from December 2012. Then from March 2014 licenced credit providers can pass your RHI on to credit reporting bodies.

    How will my RHI affect my ability to obtain credit?

    From March 2014, credit reporting bodies can disclose your RHI, along with other credit-related personal information, to licenced credit providers. Those credit providers may use this information to help determine your eligibility to be provided with credit.

    This means that if you fail to make the full amount of a payment on time from December 2012 it may affect your ability to obtain credit in the future.

    How far back will my RHI go?

    Information about any particular payment cannot be held for more than two years from the date it was due.

    However, RHI will not include information about any payment that was due before December 2012.

    How will I know if a credit provider will pass my RHI on to a credit reporting body?

    When a credit provider collects your RHI it should notify you of certain matters, including the name and contact details of any credit reporting body to whom it is likely to disclose the information.

    So whilst not every licensed credit provider will be taking comprehensive credit reporting on board, and some will take a while to apply the changes, it is really important to start implementing better credit habits NOW to ensure you’re not caught out with bad credit.

    Here’s our top tips to make sure you stay on top of your credit card and avoid a late payment notation and also defaults:

    1. Pay on time, every time.

    It doesn’t have to be a big account to have an impact on you. Accounts for as little as $150 which go unpaid can see you defaulted and banned from mainstream credit for five years. Paying on time, every time is your first line of defence against bad credit, especially following the introduction of late payment history.

    2. If you can’t pay for it – let your Credit Provider know.

    If you run into money troubles – the WORST thing you can do is pretend like it’s not happening. If you lose your job, or run into temporary financial difficulty – the smart thing to do is contact your Credit Provider to work out alternative arrangements to bridge the gap. Asking for a financial hardship variation may save your credit file even if you are struggling to make payments.

    3. Tie up all financial loose ends when you move or go overseas

    A really common way people can find themselves in trouble with their credit file – sometimes without even knowing it – is when they move house or go overseas for extended periods. Typically an account gets sent to your previous address and remains unpaid and then listed as such on your credit file. This can occur frequently with electricity accounts. If you move around a lot, consider a P.O. Box for all your mail or an alternative address. Likewise, make sure you contact your Credit Providers to inform them of your new address when you move – or if going overseas, have someone keep an eye on your mail.

    4. Check your credit statements and order a credit report.

    Many people of all age groups have the mistaken view that if something wasn’t right with their credit accounts or something was listed incorrectly on their credit file – that someone would inform them. This is seldom the case. It is your responsibility to check that your accounts are running right by checking your statements when they come in. Review each phone bill. Query anything you’re not sure of.

    In addition to this, you should also regularly check what is being seen by lenders by ordering a copy of your credit file. It is free once every year from Australia’s credit reporting agencies – and you should order it annually to make sure everything reads as it should.

    5. You have a right to correct mistakes

    Every Australian needs to know that mistakes can happen on credit reports. Likewise, bad credit can be listed on credit files unknowingly.

    A credit listing that you feel is inaccurate or unfair should be tested against the appropriate legislation for its validity and its accuracy. The process of dispute is not easy, but Creditors should be called to account for any inconsistencies. You should also know Creditors have a legal obligation to remove a listing which was placed incorrectly.

    Image: Stuart Miles/ www.FreeDigitalPhotos.net

     

  • 6 Tips For a Clean Credit File

    tips clean credit fileCurrently, we are seeing lots of people running into trouble with their credit rating. If you end up in trouble with a default on your credit file, it sticks for 5 years and can be a real thorn in your side when you go to apply for credit again. With new laws now in place from March 12 – repayments on accounts such as credit cards and loans made more than 5 days late may see you end up with a notation against your name for 2 years. It’s heavy stuff. We look at what you can do to stay savvy with credit now and in the future, and make it work for you!

    By Graham Doessel, Non-Legal Director of MyCRA Lawyers www.mycralawyers.com.au.

     

    You could be forgiven for thinking that credit is the enemy…

    But we need to develop the ethos that credit is not something that is granted, it is something that is earned. At one point banks were practically throwing money at us. Now it’s tough and you have to prove yourself.

    There is absolutely nothing wrong with using credit provided you make it work for you. In fact, not having a credit rating in this day and age can be just as difficult as having a bad credit rating.

    Where people come unstuck with credit is getting to a stage where they are forever chasing their tail with repayments, falling behind. Or getting blasé about repayments and not realising the consequences.

    Credit can be wonderful provided you maximise it to suit you. If you can’t afford it now you can have the privilege of paying for it later – but understand that you will pay at some point.

    Payments on any bills which are more than 60 days late can be listed as a default on your credit file.

    This default can remain on your credit rating for 5 years and can be very detrimental to your ability to gain further credit. Even if the account was later paid, the credit reporting agency generally does not remove the default but can mark it as paid.

    Even defaults that show up as being paid can be enough for a declined home loan approval in the future. It is extremely important to keep a clear credit file because the repercussions will be felt for 5 years.

    You also need to be organised to ensure you avoid the dreaded late payment notation against your name. Too many of those could be just as detrimental to getting a loan as a default would be.

    There is no time like the present to start making credit work for you.

    Begin by checking your credit file – which you are entitled to do for free every 12 months via the major credit reporting agencies Equifax (Formerly Veda Advantage), Dun & Bradstreet and Tasmanian Collection Service.

    If you find a default, writ or Judgment on your credit file which you believe is there unfairly, unjustly or just shouldn’t be there at all – it may be possible to have it removed.

    Here are some tips:

    1. DO USE CREDIT: Having no credit history means there is nothing to calculate and the risk appears high to lenders. Start by borrowing something small. Repaying mobile phone plans, internet accounts, or store credit on time will appeal to anyone checking your credit score. Smaller purchases paid correctly contribute to approval for larger loans such as homes, vehicles, and businesses in the future because they show a person’s ability to repay. Positive repayment history on loans and credit card accounts may also help to boost your credit score after March 2014.

    2. MAKE REPAYMENTS ON TIME: Repay any bills received by the due date. Repay over the minimum amount required on credit cards. If you are having trouble paying on time, contact the creditor as they may be able to work out a payment plan rather than listing the non- payment as a default or in the case of licenced credit, a late payment notation.

    3. HAVE A STABLE ADDRESS: Lenders like to see stability. Furthermore, defaults are easy to come by when bills are sent to the wrong address. If you do travel frequently, consider a trusted family member’s address for all bills.

    4. CHECK CREDIT FILE REGULARLY: You should check your file before you need to apply for credit. That way if there are any problems you can sort it out while there is no urgency, and save yourself embarrassment and disappointment from having credit declined.

    6. DON’T LEAVE DEFAULTS TOO LATE: If there are defaults, don’t put up with them for 5 years. To find out more about removing/disputing a credit listing you don’t agree with, contact us here at MyCRA Lawyers on 1300 667 218.

    Image: Stuart Miles/ www.FreeDigitalPhotos.net

  • Credit reporting in Australia your questions answered on bad credit

    credit in AustraliaAustralia has just undergone a major credit reporting change. If you don’t know much about credit reporting, then you could be at risk of  messing up your credit rating. Yesterday, we answered your basic questions on credit reporting. Today we answer more of your questions on bad credit and what to do about it.  Find out what you may not know about credit in Australia.

    By Graham Doessel, Non-Legal Director of MyCRA Lawyers www.mycralawyers.com.au.

    I have paid my credit card bill late, what are the consequences of this?

    Accounts like your credit card, your personal loan, your mortgage or your car loan are provided by ‘licenced’ credit providers. These providers are required to hold an Australian Credit Licence. They are also able to record and access repayment history information, include late payment history. If you are more than 5 days behind in your repayments it could be noted on your credit file. So in a nutshell, if your credit provider has previously informed you that it will be collecting repayment history, expect that notation to show up against your name, including the date the account was paid. This information will stay on your credit file for 2 years. It is unclear what the consequences of one late payment notation will be. Certainly it has been said that several late payment notations will impact your ability to obtain credit.

    I have found a default on my credit rating, what are the consequences of this?

    If you discover you have a bad credit file, you will find it very difficult to obtain credit in the future. Generally this problem will keep occurring for the 5 years the default is on your credit file. This will probably prevent you from obtaining a home loan with most lenders and possibly lead to credit refusal of many kinds from loans right through to phone plans. A default is not removed unless it can be shown it was placed in error on your credit file or was placed unlawfully.

    A record of good repayment history information may ease the severity of having a default on your credit file, but as defaults are not removed for 5 years, there is no guarantee you will be granted approval. You may also be offered a higher interest rate while the default is on your credit file.

    What can I do if there’s something I don’t agree with on my credit file?

    If there are errors on your credit file, be aware you do have the right to have them rectified. Likewise, if there are numerous strange defaults and or applications for credit that you don’t recognise you would need to immediately investigate these and notify Police in case of identity fraud.

    If you don’t agree with a credit listing that has been placed by your credit provider, and you want to dispute it, the new laws allow you to ask the credit reporting body which holds your credit file to note a dispute against it.

    Some people choose to go through the process of disputing their own credit listing, and other people prefer to leave it to a third party. Both options are there. Often it depends on a) how savvy you are b) how much time you have c) how complicated the process of dispute is going to be.

    In many cases where people have attempted to remove the default themselves, they have come across difficulties and defaults have not been cleared. Most times the creditor will explain to the client that defaults DONT EVER get removed. The best they can do is mark the listing as paid (if it’s been paid). This may not be sufficient to ensure credit is obtained with some lenders.

    If you are looking at choosing a third party to dispute your credit listing, make sure you choose wisely. You can contact the Credit Repair Industry Association of Australasia (CRIAA) for help with selecting a reputable and ethical credit repairer.

    MyCRA Lawyers is a firm focused primarily on credit disputes. Not only can we work to repair and remove your bad credit by disputing your credit listing, we can also work on your behalf in legal matters as they arise (which they frequently can).

    Images: Stuart Miles/ www.FreeDigitalPhotos.net

  • Credit reporting in Australia – your questions answered

    credit reportThere are some credit reporting changes just arrived which may affect you and your ability to get a home loan, a car loan or any other type of credit. Obtaining credit in Australia may be a little different from now on, as since March 12 Australia has stepped into a comprehensive credit reporting regime. We feel it’s important to educate consumers about credit in Australia, so we look at the credit file basics, and what you should know about taking on credit in Australia.

    By Graham Doessel, Non-Legal Director of MyCRA Lawyers www.mycralawyers.com.au

    We answer your basic questions about credit reporting in Australia…

    What is my credit rating?

    Your credit rating is a file on your credit history and is collated by the major credit reporting agencies if you have ever been credit-active. Your credit rating is then checked by any financial institution or credit provider and is used to assess both the amount you are able to borrow and your ability to repay the loan.

    What does ‘credit active’ mean?

    Anyone that has borrowed money, or has established an account for services is credit active and will have a file in their name. This includes mobile phone plans, accounts with utility companies, rates accounts and of course loans of any kind.

    What is defined as a ‘bad’ credit rating?

    In broad terms, any credit defaults, court actions or writs, external administrations and bankruptcy are all recorded on your credit file and would be considered ‘bad’ credit history by most credit providers.

    In this current economic climate, basic defaults and even too many credit enquiries or applications for credit may be considered to be tarnishing your credit rating. Your repayment history may also be considered ‘bad’ credit if you have too many late payment notations against your name.

    How do I know if I have a bad credit rating?

    If you are unsure what is on your credit file, it would be worth taking the time to find out.

    There are three major credit reporting agencies in Australia: Equifax (Formerly Veda Advantage) – which holds the credit file of over 16 million Australians, Dun and Bradstreet and Tasmanian Collection Service.

    You can write to or email one of these agencies and request a copy of your file. If you are not in a hurry there is no charge to you but it will take 10 working days from application to receive this information.

    What is not realised by many people is how easy it is to have a default slapped on your credit file. If a bill of $150 is more than 60 days late (including rates, power, and mobile phone bills) then a credit provider has the right to notify you of their intention to record this default on your credit file. Even if the account is paid and noted on your file, this default usually remains on your record for 5 years.

    In addition to this, if you are more than 5 days late repaying your credit card or loan account – you may also have a late payment notation recorded against your name.

    To find out more about credit reporting, you can visit our main site www.MyCRA Lawyers.com.au

    If you want to know more about bad credit, look out for our next post where we answer common questions about bad credit, and what you can do if you wish to dispute an adverse credit listing.

    Image: Pong/ www.FreeDigitalPhotos.net

     

     

     

  • Unemployed? 8 ways to keep your credit rating safe.

    unemployedWhat happens to your credit rating when you lose your job? There are some things you can do when you face unemployment to reduce the likelihood that your credit rating will suffer. Unemployment is often just a temporary setback. But if during the time you’re unemployed you lose your good credit rating, you could see a temporary setback become the thorn in your side that remains for between 2 and 5 years. We look at the 8 most important things to do when you lose your job to help save your clean credit file.

    By Graham Doessel, Founder and Non-Legal Director of MyCRALawyers www.mycralawyers.com.au.

    8 ways to keep your credit rating safe after you lose your job.

    1. Act. Most people feel like digging a hole and burying themselves in it for a while when they lose their job, but taking action immediately will save your credit file. Even if you think the situation is only temporary, you don’t have a crystal ball. You need to take steps straight away to protect yourself and your family from debt and bad credit.

    2. Check your insurance. If you have taken out income protection insurance, or mortgage protection, now’s the time to make that phone call to see where you stand. It can take a while for the claim to be processed.

    3. Apply with Centrelink for assistance. Don’t be too proud to ask for help. Talk to the Department of Human Services to find out what government assistance you may be entitled to and when. As with insurance, some benefits have waiting periods, so contact the department as soon as you can to know where you stand.

    4. Tally up what you owe (and what’s owed to you). Work out how much disposable income you have now, and tally up all of your bills that you consider will appear in the future. You can find a great budget planner on ASIC’s MoneySmart website which could help.

    5. Assess the credit you owe and where you may have trouble with repayments in the future. Work out how long your current funds are going to last. What you want to do is avoid getting into arrears with your accounts at all costs. It only takes 60 days in arrears on any account to get into ‘default’ with creditors, and this notation on your credit file will mean you will probably be blacklisted from credit for 5 years – even if you find another job and get everything back on track a month or two later.

    6. Make licenced credit a priority to pay on time. Licenced credit includes your credit card and loan accounts. It needs to be repaid by the due date as a priority, due to the possibility that repayment history on those accounts is being collected. If your Credit Provider is collecting repayment history, then accounts which are more than 5 days late will appear as a ‘late payment’ notation on your credit file. This notation stays on your credit file for 2 years and too many will probably impact your ability to obtain credit, or at least affect the interest rate you are offered.

    7. Notify your Credit Providers. Don’t wait until you’re in arrears, or until you’re in debt up to your eyeballs, to let your Credit Providers know you have lost your job. New laws have been introduced around financial hardship – and in your situation you are who these laws were made for! Financial hardship variations are encouraged in many industries if consumers notify their credit provider they are undergoing temporary financial hardship. Financial hardship variations can involve reduced or frozen payments and can prevent a default appearing on your credit file. Undergoing step 5 is almost essential to any successful hardship negotiation. Knowing what you can afford to pay and when, prior to talking to your Credit Providers will go a long way and ensure the newly negotiated amount is affordable for you while you are unemployed. Creditors are legally required to consider a person’s request for variation on payment arrangements, but are not obliged to agree to any hardship variation proposal put forward. But there is a trend towards offering help before defaults – so it is smart to ask.

    8. If it’s too late: all may not be lost. If you are currently experiencing bad credit due to a temporary financial hardship such as a job loss, it may be worth assessing your credit history and the circumstances around any defaults placed against your name. Any listings which are deemed unlawfully placed for whatever reason could be required to be removed by your Credit Provider. For more information on this, and disputing a default, contact us on 1300 667 218 or visit our main website www.mycralawyers.com.au for more information.

    If you know your finances are under control, then you can concentrate on finding the right job for you.

    For further and specific money help, consult a financial counsellor in your State.

    The above information is for general purposes only and should not constitute financial advice nor replace seeking help from a professional financial adviser.

    Image: pat138241/ www.FreeDigitalPhotos.net

     

  • How To Make Your CREDIT CARD work for you

    choose best credit cardIn this week’s ‘Make Credit Work For You’ post we look at credit cards. Do you currently have a credit card? Do you know what your interest rate is? Do you know if you really have the right credit card for your financial circumstances? With so many choices for rates, fees and rewards – it’s smart to spend some time thinking about the appropriate one for you. Knowing how to make your credit card work for you, which starts by picking the right card might just save you from credit debt and ensure your credit history is clear as you work towards larger financial goals.

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

    Almost half of Australians are in the dark about their credit card. According to a Choice Survey last month, 48% of Australians who used their credit card recently weren’t sure how much interest they would be charged.

    This “interest rate ignorance” has according to Choice, meant a big windfall for the creditors.

    Since June 2011, the average credit card interest rate has moved 176 basis points above the Reserve Bank’s cash rate, earning the banks an extra $630 million this year alone.

    Bit by bit, the banks have been sneaking their rates further away from the baseline. At the moment the average credit card interest rates sits 14.41% above the cash rate, up from 12.65% in June 2011, according to calculations from commercial comparison website Mozo.

    That adds up to a lot of debt – and a lot of uncertainty.

    “As a nation, we’re paying interest on more than $36 billion of credit card debt, yet almost half of us are uncertain what it costs us,” says CHOICE CEO Alan Kirkland.

    This “interest rate ignorance” points to a wider symptom of credit ignorance which has many households making poor financial decisions for their individual situations. It can be paralleled with the prevalence of high interest rate home loans for people with poor credit history. Whilst some people may need to choose this type of home loan – it isn’t always the right option, and can end up costing families tens of thousands more in interest unnecessarily.

    Whilst it is imperative to know the interest rate on your credit card – what is even more important to know – is that you have the right card for your circumstances. One which you can pay back – on time!

    Too many times people can be lured in to choosing cards with rewards or other gimmicks – which are not suitable for them and which can end up costing them severely for years to come.

    Facts about Debt and Credit Cards

    If you are more than 5 days late paying your credit card this will show up on your credit history as a ‘late payment notation’. This notation will remain on your credit file for 2 years. Multiple late payments will probably mean you are refused mainstream credit for 2 years, or only offered credit at much higher interest rates.

    If your credit card goes unpaid for 60 days or more – you will have a default placed against your name. Defaults remain on your credit file for 5 years.

    Any adverse credit listing will mean you are either refused mainstream credit, or only offered credit at higher interest rates. So you want to avoid this ‘credit death sentence’ by choosing the right card for you in the first place.

    Recently Savingsguide.com.au covered in depth the pros and cons of each different type of credit card, in their article How To Choose The Best Credit Card.

    credit cardHow Do You Use Credit?

    You need to ask yourself some great questions to be clear about your credit card usage.

    If you don’t know what you’re paying in interest – that would be a great first question to ask. The other question to ask – is how am I using my credit card? Is it for emergencies only, am I a hefty credit card user or somewhere in between? Do I tend to pay the balance off each month or carry it over? Do I have a current debt on my card I need to pay down?
    The answers will all determine which card is right for you.

    SavingsGuide make some suggestions about who should choose what card:

    They advise, if you are just going to use the card for emergencies – you are probably best looking for one with low or no annual fees.

    “This card is perfect for people who rarely use their credit cards, save their credit cards for an emergency or religiously pay off their credit card before the interest period.

    “If you’re never earning any interest on your card, it’s more important to save money on the annual fee than it is to consider how the interest rate would affect you.”

    If you use your card regularly – and if you pay the balance off each month –then you are probably the best type of person for a rewards program.

    “If you use your credit card regularly for everyday purchases and are capable of consistently paying it off within the interest-free period, then a rewards card might work well for you.”

    If you are having trouble paying the entire balance off each month – a low interest rate seems ideal.

    “If you’re totting up interest on a card, it’s essential to keep your interest rate as low as possible. Otherwise, you’ll find it increasingly difficult to get on top of the credit repayments.”

    If you have debt you need to pay down – you could switch to a balance transfer which allows you to pay off the card with low or no interest.

    “If you need some breathing space, being able to pay off debt without having to worry about interest for a couple of months might be exactly what the doctor ordered.”

    Tips to prevent bad credit history from credit card debt

    Create your own credit limit.
    Set yourself a limit based on what you can comfortably afford to repay. It’s important to realise that you will pay at some point for the credit you use. Make sure at worst case scenario you can afford to repay it. You will then have confidence in your spending without the temptation to overspend.

    Don’t exceed the credit limit.
    This will just mean you incur hefty charges.

    Pay off the balance each month.
    Ideally, pay off the entire card balance within the interest free period. If you don’t, you will be charged interest right back to the date you purchased each item. You not only lose the interest-free period on those past purchases, but until you pay off the balance there will be no interest free period on anything you spend in the future.

    Or, choose a low interest card, but still pay more than the minimum repayment amount each month.
    If you have debt which carries over on your card month to month you should look at a card that has a lower interest rate. It may not offer an interest free period, or hefty rewards points, but the lower interest rate should mean the carried over debt is more manageable for you, and will prevent you from getting into trouble with credit and ending up with defaults or late payment notations on your credit file (bad credit history).

    Avoid cash advances.
    Interest usually applies immediately on any cash advances from credit cards – whether the withdrawal is within the interest free period or not.

    You can also visit ASIC’s MoneySmart website for further information on how to choose the right credit card.

    For help repairing bad credit history, or more information on your credit rating, visit our website www.mycra.com.au or call MyCRA Credit Rating Repairs tollfree on 1300 667 218.

    Image: adamr/ www.FreeDigitalPhotos.net

    Image 2: naypong/ www.FreeDigitalPhotos.net

  • Are relaxations to guaranteed loan requirements right or wrong?

    security guarantee loanBanks have begun to relax Guaranteed loan criteria in a bid to encourage more first home buyers into the market. The relaxations from some banks will now include those outside the immediate family.  The banks seem eager to increase business in what are cautious times for home buyers. But should we all jump in? We look at what you are really risking with your asset and your credit rating by guaranteeing a loan for a family member or friend and perhaps for borrowers, when using a guarantor that is not a family member.

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

    Loan Market Melbourne broker Alexander Heifetz has recently claimed several banks have made available to borrowers ‘Family and Security Guarantee Loans.’ The recently amended policies remove certain restrictions for Guarantors, meaning a Guarantor will no longer have to be a parent, sibling or spouse of the borrower for a Security Guarantee, which was formerly known as a Family Guarantee.

    Mr Heifetz explained in a recent press release:

    “This change in policy is going to help certain first home buyers with healthy incomes but limited savings enter the property market with help from guarantees who traditionally haven’t been allowed to put their support behind a low-deposit holder’s mortgage,” Mr Heifetz says

    “Most Guarantee loans are a single loan secured by both properties: the property purchased by the first home buyer and guarantors’ property. The benefit of this option is that there is no requirement to make a Lenders Mortgage Insurance (LMI) payment and that you don’t have to demonstrate that a deposit you have was genuinely saved,” he says.

    Although these types of products are becoming increasingly popular, Mr Heifetz suggested that borrowers and guarantors considered the implications before signing a Security or Family Guarantee

    An article published last week in Australian Broker features further comment from Heifetz about the possible impact of guaranteed loans. He told Australian Broker while he appreciates that it’s a difficult time for both lenders and first home buyers, brokers need to make sure they’re helping clients view guarantee loans as a last resort – because it’s brokers in the end who are likely to be blamed when things go wrong.

     “It comes back to brokers – banks have a bunch of lawyers who will stand up for them, but brokers are the middle men and they’re the ones who will be crucified.”

    He offers solutions such as borrowers purchasing a less expensive property, or for those considering going guarantor to look at the possibility of gifting additional money or taking out a small loan as an alternative.

    Figures from Insolvency and Trustee Service Australia (ITSA) show that 441 people (non-businesses) went into bankruptcy as a result of liabilities on loan guarantees in the last financial year, and 12 entered debt agreements for the same reason, according to the ITSA’s 2011-12 Annual Report.

    If 453 people became insolvent due to liabilities on loan guarantees last year, how many more were forced to sell both homes but remained solvent? How many were forced to take over repayments on the loan for their child or family member? How many still were encumbered with a negative credit listing and refused credit for 5 years due to their family defaulting on the loan? How many didn’t know the loan was in arrears until their credit rating was impacted?

    Whilst there may be ways a borrower and guarantor can more ‘safely’ access a guaranteed loan without necessarily risking the property of the guarantor for the entire term of the loan, caution should still be exercised.

    From a credit repairer’s point of view, I would rarely recommend borrowers choose a guaranteed loan if they have other options open to them. There are just too many variables. There is no control over repayments. Now, with late payment notations on credit files, not only must repayments on the loan be made within 60 days to avoid a default listing, it must be made on time or face a late payment notation. Too many of those, and these late payment notations could impact your ability to get credit for two years.

    So as Mr Heifetz says, guaranteed loans should be viewed as a last resort – and I believe should not be heralded as a chance to boost first home buyer numbers.

    It is true house prices are still too high for many first home buyers – but banks could also relax other lending criteria such as lowering deposit requirements or allowing more gifted deposits for first home buyers – so why don’t they? And if they don’t want to bear that risk, why should we?

    Adding to the debate is Malcom Bartley, director of finance brokerage B Debt Free who has questioned why a non-family guarantor would want to make themselves so “financially vulnerable”.

    “Anything that is not direct family must be related to a business transaction. That benefit must be identified before the guarantor can be put in a position of risk. No one will take the risk just because they’re a nice guy,” he told Australian Broker on Friday.

    He warned such situations could give birth to a third-tier industry where there would be opportunities for a business to provide equity to first home buyers to obtain a government grant while they stamp the difference.

    “There’s a huge misunderstanding of the debt administration in this country – and there are groups out there that’re saying ‘if you’re in trouble come to us, we’ll buy your property and we’ll let you buy it back’” Mr Bartley says.

    He boldly said lenders need to call non-family guarantors what they really are.

    “If you’re going to call a savage canine that rips people to shreds a ‘puppy’, that’s not a lie, but it doesn’t give the true description, does it?”

    Whether or not you agree with Mr Bartley’s argument, there is no denying that any borrower who seeks help from a guarantor who is not a trusted friend or family member needs to ask two questions: what does the guarantor stand to gain from this transaction? and what could I lose?

    The risks for both guarantors and borrowers needs to be understood and weighed heavily, with the full gamut of legal advice, before any party risks their asset and their credit rating.

    Image: Ambro/ www.FreeDigitalPhotos.net.