MyCRA Specialist Credit Repair Lawyers

Tag: make credit work for you

  • 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.

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  • 16-25 and “drowning in debt” Your guide to make credit work for you.

    drowning in debtIn the news this week, we are told that the 16 to 25 age group are getting way over their heads with debt in relation to income. A News Limited story yesterday  reveals that this age group carry a much higher proportion of debt to income.  This is a worrying trend – and one that can be prevented by reaching out and educating young people on the ins and outs of credit. If you are in this age group – we give you the low-down on some important things to know which you may not have been told about credit in Australia. We show you why you don’t want to get in too much debt, and how being in control of some simple things can save you and your credit file well into your future.

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

    The stats

    The News Limited story “Young adults drowning in debt” featured Roy Morgan data showing one in three in the 16-25 age group carries more than $2500 forward in credit card debt each month and those aged 21 to 25 had an average income of $791 a week.

    The data also found 215,000 Australians aged 18-24 had a personal loan for a car and the average amount owed was $11,010.

    Why should you be concerned about too much debt?

    If you have debt which you are struggling to pay back right now – this can affect you this year, next year and for years to come. If you have ever taken out a mobile phone plan, a credit card or loan, you will have a credit file in your name. If you fail to pay your credit back on time, you will probably have notations put against your name by your Credit Provider – eg Telstra, Westpac, Energex etc.

    If you are more than five days late paying back your credit cards or personal loans – you will have that noted on your credit file as repayment history information. If you are more than 60 days late in paying ANY credit – from mobile phone bills to electricity accounts and loans, you will be issued with a default or other negative listing on your credit file.

    Defaults

    If you are issued with a default, this will have very serious consequences for years to come. You won’t be able to get credit at normal interest rates for between 5 and 7 years! You will most likely be refused major credit, and if you aren’t you will have to pay thousands more in interest. This is not the best area to go ‘alternative’ in. You want the most affordable interest rates – not paying in some cases tens of thousands more in interest just because you didn’t pay your mobile phone bill 3 years before.

    Think to yourself…what do you want to be doing in two or even five years? Maybe own a house, a car, or travel overseas? Having a default against your name can spoil all of those dreams.

    Young people in default

    Credit reporting agency Veda Advantage recently released some of their data from the last three years, which showed that Gen Y holds 60% share of all credit defaults. From telco defaults through to loan defaults – Gen Y tops the list in every category. Find out more.

    AMP financial planner Dianne Charman told News Ltd access to credit has been made much easier for the younger generations compared with a few decades ago, which has allowed them to run into debt more easily.

    “Access to credit a few decades ago just wasn’t as easy as it is now,” she says.

    “We didn’t have mobile phone access to accounts that you can run up bills on, so our kids today are faced with decisions which can rack up bills more easily, and credit cards and personal loans are far more accessible than what they have been previously.”

    What you need to know

    top five

    Here are our top five things you need to know to avoid bad credit.

    1. Be careful with all of your credit.

    It doesn’t have to be a big account to have an impact on you. Accounts which for as little as $100 which go unpaid can see you defaulted and banned from mainstream credit for five years. Likewise, any credit account can see you lumbered with a default if it goes unpaid – this goes for mobile phone accounts, electricity accounts as well as credit cards and personal loans. Paying on time, every time is your first line of defence against bad credit.

    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. MoneySmart’s  senior executive Robert Drake also recommends contacting a financial counsellor to work out a plan.

    “The earlier you tackle the problem the better, whether it’s by getting in touch with the lender and telling them you have some problems you’re dealing with or by talking to a financial counsellor,” he told News Ltd.

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

    A really common way that young 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 alternatively a parent’s 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. Parents are good for this!

    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.

    Young people need to insist on account accuracy and credit reporting accuracy. With defaults almost seemingly a ‘dime a dozen’ in the 16-25 age group, it is important accuracy does not take a back seat and see defaults pile up on Australian credit reports without an understanding of what constitutes a lawful listing.

    Order a free credit report.

    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.

    Changes for the better are coming in Australian credit reporting particularly around correction of credit reporting mistakes, but education is key for every credit active individual to make best use of these changes, aware of the action they need to take to ensure their rights are upheld.

    Where to go for money help

    AMP’s Charman suggests younger Australians find themselves a money mentor to help them when facing important financial decisions, such as parents, aunts or uncles. This is a great idea. Having someone to bounce decisions off can really improve your chances of making the right decisions for you not just for now, but for later as well.

    Also go to the MoneySmart Rookie website for under 25’s, and get help with a range of financial decisions including handling credit and debt, getting a car, starting work, moving out of home, understanding mobile phone deals and plans and online transactions. You can also visit savingsguide.com.au – a great advice centre and blog for all-things money which is focused not only on saving money – but also on repaying debt. Their motto is ‘it’s not how much you earn, it’s how smart you are with what you have’.

    As a young person, getting to know your rights around credit and your obligations will empower you well into the future, and set up habits which will see you in good stead for your whole financial future. You can find more information on your credit file or disputing a credit listing on our website www.mycra.com.au  or by subscribing to our blog www.mycra.com.au/blog.

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  • The Top 5 Reasons You’re Still In Debt

    debtToday we feature a Savingsguide.com.au Australia article on the hang-ups you might have with money that could be stopping you from recovering from debt issues.

    This article is posted in its entirety in aid of our ‘Make Credit Work For You’ section, helping you to stay credit savvy, and giving you the best chance to prevent credit rating defaults and have your credit file looking its best.

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

    Below is Savingguide’s article about why it is you might still be in debt:

    The Top 5 Reasons You Are Still In Debt

    By Alex Wilson, Savingsguide.com.au

    Have you ever wondered why it is you are always in debt? I have. It’s much like trying to lose weight, you always find yourself secretly knowing what you are doing wrong but never wanting to admit it.

    This is what led me to start thinking about some of the reasons we as consumers remain in constant debt. While we probably know that we are doing these things, it’s not until someone calls us up on it that we realise we need to fix it.

    So here are the top 5 reasons that you continue to have a credit card debt, personal debt or any other kind of debt.

    Tell me if you agree or not at the end as I would love to know your thoughts on this.

     

    5. You earn X per day, but spend Y

    I did the simplest thing the other day. I got my monthly salary, divided it by the number of working days in the month and found out how much money I make, on a daily basis, after tax.

    What astounded me was that it wasn’t a whole heap when you factor in that each day I buy train tickets, coffees, food and the odd magazine or gift.

    One of the biggest reasons we as consumers remain in debt is that we end up living to work, instead of working to live. Do you really want to spend all that money on a work day when it’s bit by bit taking away from your daily earnings?

    Do the math – figure out your daily rate and then do a rough calculation of how much you spend on any given day. It’s scary.

     

    4. You focus on what you want, not what you have

    Another reason you are still in debt is that you forever focus on the things you want, not the things you already have.

    Stop desiring over clothes, cars, fast food and other easy ways to spend. Start focusing on the clothes you already have, the car you already own and the food you already have in the cupboard.

    Consider reading about how to stop buying stuff to solve problems – it might give you some ideas on how to make do or assess whether you really need something.

     

    3. You swipe credit, delaying your rational thinking

    Swiping a credit card obviously puts you in debt. Another thing it does is disconnect you from the reality of your finances. Money becomes a play thing.

    Try and reconnect with your money, use only cash for a while. It gives you a better sense of what you are spending. Parting with a $50 note is much harder than swiping a card.

    This mentality of delaying your rational money saving thinking is partly to blame for why you remain in debt. Always opt for cash where possible.

     

    2. You have no clue about expenses, their amount and their due date

    You know you pay the mortgage, phone bill, Foxtel bill and more – though you don’t really know how much they all cost as a whole.

    Yes the phone bill is only $29, but when you add it onto the list of other expenses that recur every month, it quickly gets out of control.

    Learn the total of your expenses by setting up a direct debit account that is solely for recurring expenses. After a month or so you will quickly see the stand alone expense transactions and it will help you calculate what you pay on any given month.

    From there, open up your work PC or home PC and make a calendar in Outlook or Google Calendar. Make recurring appointments on the days these debits come out of your account. This means you will always know in advance what expenses you have coming up.

    I even set mine to alert me on my phone 24 hours before they are due. It keeps me in charge of my expenses and fully understanding of just how much I am spending.

     

    1. You have no budget and no focus on repaying debt

    Another reason you remain in debt is because you are not proactive enough. Having a budget is one thing, but what you really need is a budget that focuses on finding spending leaks that can be repaired and used to fund extra debt repayments.

    Read more about budgeting to get out of debt here or alternatively, check out the Savings Guide Budget Spreadsheet here.

    A MyCRA Credit Rating Repair tip to stay credit savvy…

    If you are educated on credit reporting in Australia, you will save money. Know what the rules are around credit reporting in Australia, and know what your credit file says about you. If you discover inaccuracies on your credit file you can save yourself money by having them removed.

    If you have neither the time, nor knowledge of legislation that is required to deal with Credit Providers, a credit repairer can advocate for you to make the case for removal of inaccurate defaults from your credit rating on your behalf.

    Image: artur84/ www.FreeDigitalPhotos.net

     

  • Use a budget to take advantage of low interest rates

    budgetIf you didn’t already know, interest rates are now at their all-time lowest at a reserve rate of 2.75 per cent. And banks have begun to lower their interest rates – which is good news for borrowers. In this week’s Make Credit Work For You post, we look at how can you best benefit from those cuts by saving.

    You might be saving for a home, or you might be saving in your home – but we show you how to budget. If you’re saving for a home loan, now seems like a great time to purchase – with interest rates at their all-time lowest. If you haven’t quite made it there with your deposit, we look at how a strict budget now might get you there quicker. If you own your own home, take advantage of these low interest rates by paying down your mortgage as fast as possible. This can give you space to re-borrow, to invest or to renovate in the future.

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

    When interest rates are low, you can borrow or if you have current debt, you can pay your debt down in less time. We show you how you can do that, with tips from Savingsguide.com.au. Their article ‘A Guide On How To Budget To Save Money’ caught my eye this week. With new credit laws coming, and new information about you becoming available to lenders very soon, I believe it’s time to help Australians develop some really good credit habits, and to have their credit reports reflecting that.

    Nothing helps with credit habits better than a budget does. As soon as you start with a budget, it forces you to take stock of what you have, and become aware of your spending and credit habits. Australians in that frame of mind are more prepared for next year’s changes to Privacy Laws. And prepared they do need to be. Borrowers will be under the microscope. And they need to be on top of their game when it comes to their finances to not be disadvantaged by credit reporting changes. Let’s look at an excerpt from Savingsguide’s article on how to create a budget:

    How to create a budget

    To make a budget, you must consider the following:

    Income

    Decide whether your budget is going to be weekly, fortnightly. I would usually choose whichever budget aligns with the regularity of when you get paid. Once you’ve decided, write down all the income you receive in that month.

    Expenses

    Write down everything you spend in a week. Chances are you won;t get it right on the first stab, as we spend unconsciously. Here are some ways to track what you’re spending for your budget:

    Keep a spending diary. Keep all your receipts, and tally them at the end of the week.

    Go through your daily bank account, to check for debits from your account (insurance, membership fees et) that you might not even have be aware of.

    Use a tracking app, such as Expense Manager or Expenditure.

    Are you in the red? Or in the black?

    Tally up your figures, and you’ll have an initial idea of whether you are running your finances in the red or the black. If you’re in the black, fantastic! You now can just add some extra space in your finances. If you’re in the red, a budget will help you to get back on track. Why not colour code using red and black to help you?

    Analyse where your money is going & where your budget is leaking

    Where is the money heading? What area of your life is draining your finances the most? Chances are, if your budgets look anything like mine, entertainment costs are always shocking. The amount I spend unconsciously on food, shows and late night tipples are, without a doubt, the major unnecessary drain on my income.

    What are your essential costs, and how much do you have left over once they’re paid for?

    Trim the fat from your budget

    Now look for where you can cut back. Discretionary spending is a major source of savings in a budget. Aim to reduce your spending, not cut it out entirely. Great budgets are consistently refined and improved, so start relatively gently. How much do you need to save to get into within your income? Where can that come from easily, and sustainably?

    Consider these points:

    Housing costs should only comprise 30% or less of your net income. If it’s costing more than that, perhaps it’s time to make some big decisions about where or how you live.

    The average Australian household spends the same amount on alcohol as they do in utilities per week. If that’s the case, there is a major saving opportunity there.

    We should always consider what we have (in the pantry, in the house to sell) when writing out budgets. We should aim to declutter our life to add extra money to our budget. Sell the stuff you don’t need people! Draft budget

    You now have a draft budget. I would call it a draft, as it is a work in progress, one that needs continual revision and maintenance. You should have allocated a general sum to each section of your life, including a sustainable and sensible amount you will be saving per week.

    Tips to help you succeed with your budget

    For the best results when budgeting, you should consider these three core principles:

    Automate your money. As soon as your pay comes in, automatically move your money into the sections you have decreed for your budget. This means money gets automatically deposited for rent, debt repayments, savings etc. We can be our own worst enemy, so take yourself out of the equation.

    Discretionary cash. For your entertainment budget throughout the week, I like to have it in cash. The reason? Because once it’s gone, I know I’ll just have to stay in and watch TV until next week.

    Keep it simple. It’s essential to not start out too strictly with a budget, it’s often where people fall down (more on this below). Remember, you can always save any money that’s left over and you can always change the amount you’re budgeting throughout the week.

    Maintaining your budget

    Once you have a budget, you will find yourself needing to occasionally maintain it and update it as you go. Track your budget progress

    The absolute best way of maintaining enthusiasm and drive is to watch how your finances have improved. Look at your dwindling debt, or increasing emergency fund. You’ll feel empowered and capable of continuing all the good work. Use a budget program

    Apps such as iReconcile or Moneybook can be a great way to easily manage you budget if you’re technically minded. Alternatively there is the Savings Guide made budget planner for purchase here.

    Constantly revise your budget

    I can’t stress this enough. Budgets are ongoing processes- sometimes they’re too harsh, sometimes they’re too soft. Could you save more? Are you living at an absolute pinch, and eating only two minute noodles? Extremes are never good, and great personal finance is about sustainable saving.

    Keep your budget goal orientated

    It’s easy to lose motivation, and everybody does. The key is to continue to look at your goals, adapt your goals and celebrate how much closer you are to achieving them.

    Fixing your budget

    Got a problem with your budget? Here are some solutions to common budgeting woes.

    Losing motivation: Your budget fit isn’t right. Either your budget is too tight, and you’re unhappy or it’s too loose and you’re not seeing the changes you need. Use some trial and error to work out what fit works for you. You can change your budget figures from week to week, until you get it right. The important thing is it’s both comfortable and effective.

    Broke the budget: It happens to everyone. Don’t give up on the whole thing because of one bad week. It’s a slip up, not game over, so just move on.

    Forgotten expenses: A major expense can easily be forgotten, and can easily undermine a lot of hard work when it it is. Don’t panic, this is why we budget, to ensure that unexpected expense is covered. Note the expense in your revised budget, and you can be sure you won’t have to worry about it again.

    You get a pay raise: Add it into your budget, but aim to invest the raise in your savings or debt repayment. You’ll be amazed at how quickly your finances improve, and how budgets can enable you to live within your means.

    If you have tidied your budget up, and managing to make headway with savings, it is a good time to take stock of what your credit file says about you. Before you apply for a home loan, check that your credit report is accurate and up to date. Each year you are entitled to a free annual credit report – and if you haven’t ordered one this year, you should.

    You can request a free credit report through Australia’s credit reporting agencies such as Veda Advantage, Dun & Bradstreet or Tasmanian Collection Services. You may need to contact all of these agencies. A report will be mailed to you within 10 working days. If it’s urgent you can request one quicker for a fee.

    Check that everything reads correctly. If there’s anything you’re not sure about – particularly credit listings which might hold you back from obtaining credit, address them with your Credit Provider before you apply for credit.

    To get help to make a case to dispute your credit listing, you can contact a credit repairer. Click here for more advice on this.

    Image: patpitchaya/ www.FreeDigitalPhotos.net

  • Are you lying to yourself when it comes to credit?

    money liesIn this week’s ‘Make Credit Work For You’ post, we look at the lies we tell ourselves which see us taking on too much credit, or see us run into trouble with our credit file. Those lies can end up leaving us unable to pay, and blacklisted from credit for years to come. What should you be honest with yourself about when it comes to borrowing money? This post is inspired by David Koch’s recent article ‘Money lies you need to stop telling yourself’ featured on news.com.au. 

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

    According to Kochie, telling yourself financial lies is pointless. He says it’s time to toughen up and stop the lies, as these can cost us big time in the future.

    So, what things can we lie to ourselves about, that could cost us our good credit rating down the track?

    * As long as my job pays well, it’s OK if I hate it.

    Kochie says staying in a job that you hate, even if it pays well, means you don’t have your heart in it, there will be no commitment, no passion and your boss will eventually latch on.

    “Inevitably, you’ll be the first one to go in any redundancies and the one overlooked for any promotions,” he says.

    So before you apply for credit, especially major credit like a home loan – it’s important to understand the long term commitment, and consider whether the career you’re in is going to fulfil you for at least several years to come. In the early years of a loan, your repayments will be at their highest and it will be essential to put your head down and pay off as much as possible.

    Kochie says success comes easiest to those who love their job. So if you don’t – it might make sense to spend some time getting settled in a job you do love, before you apply for major credit.

    However, if you are unhappy in your job and are currently paying off a mortgage or other significant loan – it’s important you are really smart about how you change careers. Consider your loan first and foremost before you make any drastic career changes. You don’t want to be caught out unemployed and unable to pay your loan.

    * If I turn a blind eye, somehow my finances will work themselves out

    Burying your head in the sand is never a solution to your financial issues. They only snowball.  At this point in time in Australia, paying bills even one day late may directly impact your credit file, through licensed Creditors recording your repayment history information. Paying them later than 60 days will see you defaulted.

    The government has made changes to credit laws in order to assist consumers in financial difficulty, but you need to put your hand up and own your financial problems, and you need to have a plan.

    To begin with, stop lying to yourself about how much money you actually have. To get any help, or to help yourself, you first need to know exactly how much you have left at the end of the week – or even how much you are in the red.

    If you know you can’t make your credit repayments, work out how much you can pay from what you have, and give this information to your Creditors to negotiate a financial hardship plan which may see your repayments reduced for a period of time. For more information on financial hardship variations, visit ASIC’s MoneySmart website.

    If you are not in dire straits yet, don’t wait till you’re there to do something about it. Kochie recommends starting with a plan that involves either cutting back expenses or earning extra income to balance the books. Make a goal, make a plan and get yourself there.

    * I should buy a home because that’s what grown-ups do

    Despite the ethos that everyone in Australia has the right to own their own home, buying a home is not right for everyone. Kochie argues that for some, renting and investing your savings can be a better financial option.

    For others, they may see more results being able to buy a home and focus on paying down the mortgage (creating equity) as their investment strategy.

    And some people just won’t be able to meet the big financial commitment that a home loan entails, even if they want to, and even if on paper, they look like they could. If this is you, consider that for now, you may be better off learning more about how to make credit work for you, to gain more money skills and adopt a different attitude towards money and credit before you take the plunge.

    * If I dip into my savings now I can always make up for it later

    Kochie advises it’s way more productive to leave your savings untouched and earn extra to pay for the item or experience. If you are saving for a home or business loan, then more savings means cheaper credit.

    * If I get approved for a loan or credit limit increase, I can afford it

    Kochie says this is probably the most dangerous of all lies. “Forget what the bank is offering in terms of increased credit card limits or loan amounts, only you really know what you can afford,” he says.

    Remember, the bank doesn’t have to pay your loan back – you do.

     

    Some other lies you can tell yourself about credit which you shouldn’t:

    * No news is good news when it comes to bills.

    No its not! If you think you should have received a bill and haven’t, the best thing you can do is chase it up. Nine times out of ten your Creditor thinks you should have received it, and you accrue days in arrears, meaning they may default you anyway whether you received the bill or not. This is especially important if you change addresses.

    *If I love someone, money doesn’t matter.

    Money still matters and when it comes to credit accounts, love may be blind but your Creditors are not. You need to keep your head in money matters when love is good and when love goes bad. Sometimes joint credit accounts can land you in hot water. Cover yourself and your credit file against the worst.

    * Someone else will tell me if my credit file is not accurate.

    No they won’t, it’s up to you to be proactive. There is an avenue for complaint if you think your credit file is inaccurate, but the responsibility for finding out whether everything is correct rests which the individual credit file holder. So it is really important that you do an annual credit check (which is free) through Australia’s credit reporting agencies. Don’t leave it until you’re applying for a home loan to find out you have defaults or other credit listings you don’t think should be there.

    To find out more about credit file accuracy, visit our main site www.mycra.com.au or call a Credit Repair Advisor tollfree on 1300 667 218.

    Image: Teerapun/ www.FreeDigitalPhotos.net

  • Make a mortgage work for you: Taking a conservative approach to purchase price

    In this week’s ‘Make Credit Work for You’ we take a look at the biggest form of credit many consumers are likely to take out – finance on a home. Whilst a home loan is a unique form of credit in that it will generally appreciate over time, there are ways it can be an unsafe form of credit. We look at how you can minimise the risk to you and your credit file when you purchase your first home.

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

    In Australian Broker Magazine article FHBs urged to take caution when signing on to a home loan last week, a financial comparison website warned first home buyers they should be looking carefully at purchase price following research showing many are taking on more debt despite the relative stagnation of the housing market.

    Research by RateCity shows first home buyers are taking on more expensive mortgages on the back of steady growth in house prices over much of the past 15 years:

    According to the site, the national average first home buyer mortgage size almost doubled in the past decade, to $297,100 in January 2013 and FHBs are taking on almost three-times more debt than they were 15 years ago.

     If the average first home buyer loan size kept in line with inflation only over the past 15 years, RateCity estimates first time borrowers are taking on a further $133,869 (or 82%) above the inflation adjusted average loan size…

    Michelle Hutchison, spokesperson for RateCity, says that while there are good opportunities to enter the home loan market this year, FHBs need to be cautious about taking on too much debt.

    “Australia’s property market is looking positive for first home buyers with record low interest rates making home ownership more affordable and luring some buyers out of the woodwork. While prospective home buyers are starting to enter the property market, borrowers need to be careful about how much debt they can afford to take on.”

    If we figure that most home buyers are now falling into the category of Gen Y, Ms Hutchison’s statement is a wise one. Recent reports from credit reporting agency Veda Advantage show that Gen Y has the lion’s share of bad credit at 60% of all defaults. The most important thing for you as a first home buyer to do is to decide on a purchase price that suits your needs now, and in the future.

    We can ensure we don’t become part of those statistics and ensure the home is really affordable, by considering three things.

    1. Is this mortgage going to still allow me to live?

    Just scraping into a sky-high mortgage could be a detriment to your lifestyle and even your happiness. Do you have wiggle room between your repayments and your wages for savings or for lifestyle purchases? What if your income decreased slightly? Leaving a bit of room for emergencies and also just enjoying life can make all the difference and can mean the money you don’t use can go into extra repayments on your loan, and you can pay it off quicker. Having no room for incidentals will invariably mean if life throws a curve ball at you, you’ll be likely to end up in debt and with a default on your credit rating or worse – all because your purchase was too impulsive and just downright too much for you to handle.

    2. Can repayments be made with only one income?

    This is a big trap for couples – even if they don’t intend to have children in the near future. Accidents, sickness, break-ups and yes, children can put a strain on finances and can mean the mortgage is paid from only one income for a period of time. Can you cope with the mortgage if this happens?

    3. How much equity do I have in the home?

    This may seem like a trick question, as really first home buyers have very little equity when they first enter a mortgage – but the bigger the deposit in relation to your purchase price, the more equity you will have, and the more freedom you will have. Having equity will make changes such as refinancing easier, and if for any reason you need to sell the home, you will be less likely to be left with a debt.

    When we think about equity, we can also consider future equity. To capitalise on equity it may be best to have a good think about the area you are buying in in relation to your purchase price. Is this area likely to grow much over the next 5-10 years? Is the type of property I am buying likely to be sought after in the area? Is it close to the median house price for the area? For instance, you might be better to buy an apartment in an inner city area which is going to see significant growth rather than a four bedroom home in an outer suburb which is surrounded by cheaper properties. Or on the flipside, you may be better to buy a modest home in a suburb surrounded by expensive properties rather than a penthouse apartment which is flagged on all sides by basic 2 bedroom rentals. Real estate has a general rule, buy the worst house in the best street – but of course – if you can’t afford to do renovations – it would be a good idea not to buy the worst house if it needs lots of work!

    When making this decision on your financial future, do your homework. Buying a home should not be rushed. Research the area, research what you can afford to pay – and think of this decision like an investor would. After all, the stability of your finances and ultimately the credibility of your credit file rests with it.

    The government’s Money Smart website provides good advice on Buying a Home:

    How much can you afford?

    A good way to find out how much you can afford to spend on a property is to review your household budget. If you don’t already have one, use our budget planner to:

    • Take what you’ve saved as a deposit, add in first home buyer assistance (if applicable), then work out how much you can afford to borrow

    • Work out how much you can comfortably afford to repay on a home loan each month, and add a bit more to act as a buffer in case of interest rate rises

    • Include all the costs that come with home ownership: up-front costs like stamp duty and legal fees, ongoing costs like land and water rates, house and contents insurance, and repairs

    This article is intended to give ideas only for general information, and should not be taken as financial advice. We recommend you contact a reputable financial adviser about your unique situation to decide what is best for you.

    Image: ponsulak/ www.FreeDigitalPhotos.net

  • Fixing up Your Finances

    repairing financial damageIn our Make Credit Work For You spot this week, we look at how to dig yourself out of financial strife. ‘Repairing Financial Damage’ was written by Fran Sidoti over at Savingsguide.com.au. We hope it helps if you are experiencing some financial difficulties.

    MyCRA Credit Rating Repair  www.fixmybadcredit.com.au. https://www.facebook.com/FixMyBadCredit.com.au

    Repairing Financial Damage

    No matter how good we are with money, life can tend to get in the way of our best intentions sometimes. Whether you’ve had to dip into savings or accrued some debt on your credit card, it’s very easy to get in a spot of financial bother. If you want to dig yourself out- and pronto- here are some things you can try.  

    Set Financial Goals  

    Probably you already have some. But it’s worthwhile revisiting them, to reconfigure what you want from your finances and how you intend on getting there. Are your financial goals the same as they were 6 months ago? Has your financial situation altered, without you changing your financial set-up? Write out your short, medium and long-term goals, it doesn’t even matter how far-fetched they are. Writing out our goals is the one area in life where we can be as unrestricted as we please.  

    The Road Map  

    Now, how do you intend on achieving those goals? Was your budget a bit too stringent, or perhaps a bit too lax? Is your financial situation sustainable? If you feel as if your set-up isn’t tenable, then what needs to change? Perhaps your expenditure is too high or you need to consider other income sources to get you where you want to be in 5 and ten years time.  

    Financial Fix Up  

    Probably your short-term goals are now a bit different considering you’ve got a couple of things to fix up. If you’re looking to restore depleted savings or pay off a bit extra on your credit card, analyse what you can change in the short-term to clear yourself as quickly as possible. What expenses can you cut down on? It’s amazing to think that organising your food for the week- for example- could be enough to pay an extra $100 into your savings or credit card, and get you well on the way to recovery. If your expenses are already as tight as they can be, look at ways to earn some extra income for the short-term. You could check out freelance work, or write some blogs online. Maybe a couple of weekends helping out your mates would do the trick.  

    Structured Repayment  

    If that isn’t going to fix the issue quickly enough, or if you’re paying high interest, think about consolidating your debt into a loan and having a structured repayment plan, It could give you the consistency you need to organise your budget and will almost certainly allow you to do at a lower interest.  

    Stay Positive  

    The worst thing to do would be to beat yourself up about it. Like all things, having rock solid finances is an ongoing process and no one has it perfect all the time. Things happen, and feeling negatively about the situation is only making your life harder unnecessarily. Negativity will also make it harder to approach the situation and make it all the more tempting to stick your head in the sand. Better to reflect on the positive changes you’ve made to your finances, and how you are now completely equipped to deal with the setback. We get better at salvaging a challenge every time and although we’d all like to never have one, the chances of smooth sailing all the time are slim. So get back on the horse and you’ll be right back on top sooner than you think.

    If your credit file has met with some setbacks during the process, then you will want to reflect on what to do for your future. It really depends on where you want to be over the next five years. Your credit file will show up with any credit defaults for the next 5 years, and any late payments for the next 2 years. If you have a major financial goal you want to achieve over the next 5 years, such as buying a property, or a business venture, then you’ll need a good credit rating to borrow. You may be prevented from accessing mainstream credit (at affordable interest rates) if you have bad credit.   All may not be lost though. Depending on the circumstances surrounding your default you may be eligible for credit repair. To check this out, you can contact us on 1300 667 218.

    For more information on credit repair and how we might be able to help clear your credit file permanently, visit our website www.mycra.com.au.

    Image: David Castillo/ www.FreeDigitalPhotos.net

  • How To Spot the Difference Between Needs and Wants

    wants and needsIn our “Make Credit Work For You” post this week, we have a great article from Savingsguide Australia. Just subscribing to this blog alone will give you some invaluable tips you can use to help you rise to greatness with your finance goals. The article today is “How To Spot the Difference Between Needs and Wants.” If you have decided to live a life of frugality and perhaps have heard of the concept of Affluenza (when too much is never enough), then you will know a bit about the distinction of wants and needs. We may need to eat, but we might only want the big screen TV. Making the decision which is which is an ongoing battle. Thinking wants are needs causes many of us to buy more than we can afford, and we find ourselves struggling to pay back credit. Too many runs of this, and we end up defaulting on our repayments and a Credit Provider somewhere penalises us with bad credit that takes 5 years to shake off. Education and awareness is the key to changing this kind of behaviour – which is natural in all of us. So have a read of this article, and hopefully it helps you spot the difference.

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

    How To Spot the Difference Between Needs and Wants

    By Fran Sidoti

    I’m always the worst when it comes to thinking of how many needs I have. I need an expensive haircut. I need clothes with a more expensive price tag. I need, need, need. Life becomes a much simpler business when I realise that, in fact, these are wants, not needs and they are not essential to my well-being.

     What do I need? Enough food to not feel hungry, a warm place to sleep at night, a couple of goals to chase and people who love me to surround myself. Beyond those things, I probably don’t need much.

    This new Zen me is a little bit inspired by Adam Baker’s guest post on Get Rich Slowly, discussing his wants and needs. Returning from their nomadic lifestyle, Baker and his wife decided to look for a rental with three bedrooms, not the absolutely necessary two bedrooms, so Baker would have a space to work.

    The house they eventually settled on had flaws, but Baker suggests that by concentrating on the fact that three bedrooms was, in itself, a luxury, the flaws of the house tended to lose their importance.

    So, how can we start to fulfill our needs and appreciate our wants for what they are?

     Write it down  

    The best way to understand your own psyche is, sometimes, to write it all down. Construct two tables and write down your needs and your wants. Have a look at the list. Are there things that are under ‘needs’ and are really more things you want? Write down the list again, this time with a bit more self-reflection, and see what that reveals.  

    Ask yourself if you really need this  

    Before you buy anything, repeat the shopaholics’ mantra- do I need this? You’ll end up saving a lot of money that you might otherwise spend on unnecessary purchases. Sometimes it turns out you neither need it or, deep down, want it all that much. So many of my purchases are due to boredom or a mild inclination. Don’t buy things you’ll never really wear or use. Save the purchases for something you’ll really love.  

    Fund your needs  

    Ever spent all your money on entertainment, only to discover you’re short on rent, bills and will be reduced to eating baked beans for a fortnight? Fund your needs first, then fund your savings, and then spend some money on your wants, You might think that constant partying is the thing that makes you happiest but, in the end, the anxiety that accompanies constant money problems is probably not helping you get the best night’s sleep.  

    Know your important wants  

    In all of this, it’s easy to lose sight of how to enjoy life. Don’t cut every single want from your life. Don’t become a martyr to the savings cause. If you cut out all the little wants from your life, you’ll end up with the money to spend on the important wants- like travel, or a renovation. Use your spare cash on special things, and appreciate them for what they are. I don’t need an expensive haircut, but I know how good it makes me feel about myself and how much I love the whole ritual of a good haircut, so I’m willing to wear cheap clothes and have nights with friends at home so I can spoil myself once in a while. An odd want, but there you have it.

    AffluenzaThis concept can be easily applied to credit. Just because you use credit, shouldn’t give you a licence to buy whatever, whenever. Understand just because you don’t pay now doesn’t mean you won’t pay at some point for the credit you use. Save your credit for your important wants, and appreciate them all the more for their rarity.

    Maybe throw that long sought after holiday on the credit card and take the family away. Or take out repayments on an educational course that will change your working life forever. Or perhaps buy a home, but after years of good saving. One that fits all the requirements of what you need, rather than what you want. A home you don’t have to work 24/7 to pay off because it is priced within your means.

    What you shouldn’t do is spend money you don’t have, on things you don’t need, and ultimately find yourself with what you don’t want – debt, unhappiness and a bad credit history.

    Here’s some extra reading on this concept: http://mycra.com.au/blog/2011/07/caught-affluenza-affect-credit-rating-health/

    What does your credit file say about you?

    Think of your credit file as a mirror on your finances. It can reflect your assets, your good history, but it can also reveal your financial shortcomings. It can be a reflection of your inability to stick with something, your disregard for repayments and it shows the financial potholes we fall into that are sometimes impossible to climb out of.

    A bad credit rating can completely change your financial situation. The black marks placed there by creditors show up on your credit file for 5 years. Bad credit can limit your choices and can perpetuate the debt cycle by leading you to choose loans with higher interest rates and more fees, so the struggle to make repayments can be even harder.

    If you want to try and start again with credit, it may be possible to wipe the slate clean, particularly if your bad credit rating should not be there.  Firstly, obtain a free copy of your credit report from one or more of the credit reporting agencies, Veda Advantage, Dun & Bradstreet and Tasmanian Collection Services (TASCOL). If your credit file contains obvious inconsistencies or even if you’re not sure, you may be a good candidate for credit repair.

    A credit repairer can work with creditors on your behalf to completely clear your credit file of all defaults, clear-outs, writs and Judgments which contain errors, are unjust or just should not be there. This means we you longer have a bad credit rating, but a completely clear credit file, giving you the financial freedom to use credit whenever we need to.

    The rest is up to you.

    Image: David Castillo Dominici/ www.FreeDigitalPhotos.net

    Image 2: graur razvan ionut/ www.FreeDigitalPhotos.net

  • Credit cards: The real deal on choosing the plastic fantastic.

    choosing the right credit cardCredit cards are not always bad, but you have to make sure you get the right one that fits you and your lifestyle. It’s important to read the fine print before you decide on a credit card. Avoid getting enticed by rewards and low interest periods, and take the time to understand what you can afford so you can choose the card that is right for you. That’s the key point to avoid bad credit history through credit card debt and make credit work for you.

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

    Choosing the right credit card is essential to your finances – in the end it can be the difference between good and bad credit history.

    Money saving website, Savingsguide Australia have 5 tips for choosing the right credit card.

    5 Tips When Getting A Credit Card:

    1. At The End Of The Month. If you’re unable to pay off your credit card at the end of the month, Yahoo! Personal Finance suggests looking for cards with 45 days of interest free and then cards that have the lowest interest on purchases. I would also suggest keeping credit use to a minimum until you’re able to pay it off at the end of the month.

    2. Fee. If you’re planning on using your credit card frequently and for rewards programs, then an annual fee might be a worthwhile spend. You could be looking at anywhere between $50 to $250 a year, but if you’re redeeming your points for money-saving purchases like flights or accommodation, it might be a worthwhile investment. If, however, you’ve got the card as an emergency back up when you go overseas, you may as well just get a card that doesn’t have an annual fee.

    3. Interest Rate. When getting a credit card, it’s essential to weigh up whether any outlay on the card is a worthwhile investment. The same is as true of interest as it is of the annual fee. The card might have a high interest rate but if you can be certain you’re going to be able to pay it off at the end of every month, then those cards can also offer great rewards. Often, it’s stipulated you have to be earning over a certain amount to qualify to use the card.

    4. Use It Everywhere. People look dismayed when they come to my work and pull out an Amex or Diners. Sure, we can transfer it. At the cost of a 3% surcharge, which usually precludes anyone from wanting to use it. Amex and Diners come with great rewards but a lot of businesses, at least in my town, have no interest in processing them so you have to rely on two cards. Recently, however, cards have been released where they are two cards in one (an Amex and Visa, or an Amex and Mastercard). So if you’re keen for the reward points, it could be worth investigating that option.

    5. Bonuses. Credit cards are big business, and they want to make sure that they keep yours. Hence, the amazing world of bonuses for your credit cards. The most obvious, and the most commonly used, is the protection should you be a victim of fraud. If it happens on your credit card, the bank will usually cover you as part of your credit card contract. If the same thing happens on your debit card, you’re not always as lucky. Other bonuses can include short-term insurance on items bought on your credit card or little luxuries like privileged access to concert tickets when they go on sale and the best seats. If a credit card fulfils all your other criteria, a bonus scheme could be a great way for you to save a bit of money throughout the year.

    Some great advice there on choosing credit cards. One important point is to not be sucked in by promises of rewards or other special deals when choosing credit cards – concentrate on the fees, interest and repayments. If you can afford all of that, then look at the possible benefits rewards can bring.

    Here is my advice 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 or watch this youtube video featuring ASIC Commissioner Peter Kell.

    http://youtu.be/YFLDegKGgLI

    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: hin255/ www.FreeDigitalPhotos.net

  • Financial freedom: are you self-sabotaging?

    self-sabotaging financial freedomIn today’s ‘Make Credit Work For You’ post, we look at advice from the Editor of Smart Investor magazine, Nicole Pedersen-McKinnon. Her article “Financial freedom: are you self-sabotaging?” was featured in Sunday’s Sydney Morning Herald. Nicole gives you some excellent advice for how to make the best of your money, and make sure you are not making basic mistakes that could see you taking longer to reach your ultimate financial goal of being debt-free.

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

    Financial freedom: are you self-sabotaging?

    IT’S likely the people around you know whether you’ll ever ”make it”; that is, make and keep enough money to secure the life you crave. They’ll know this simply by observing your behaviour. And they’ll know it quickly.

    If you’re game, ask their opinion to see if they squirm.

    The wrong attitude to your cash – leading you to do the wrong things with it – indicates a ticking financial time bomb. Here are the mistakes that will lead to an explosion:

    ■ Missing the (second) once-in-a-lifetime opportunity to repay your mortgage fast and save a fortune. Official interest rates have returned to the record lows set during the credit crack-up, and home-loan rates have plunged about 4 percentage points. Say they hypothetically stayed here and you hadn’t ever reduced your repayments, the extra $700 or so you would be contributing to a $300,000 mortgage would save you $118,000 and almost 11 years.

    ■ Keeping lazy savings. There is no excuse for holding money in low-interest savings accounts. You should be getting about 5 per cent (taxed) or, better still if you have a mortgage, an effective return of about 5.5 per cent (tax-free) by sticking it in there.

    ■ Not grabbing gifts such as government allowances, benefits and super giveaways. The big ones you need to apply for include first-home buyer concessions, family tax benefits, baby bonuses or paid parental leave, childcare assistance and the super co-contribution.

    ■ Falling into the yawning traps set by finance companies. The largest are making new spending on 0 per cent balance-transfer credit cards – this will be charged at an eye-watering interest rate. If you are ahead on mortgage repayments, then taking up a thoughtful offer to reduce your repayments is designed to recoup the lender’s lost interest. Also, if you breach the conditions to get the headline rate on savings accounts, you will lose out. You must hit the monthly requirements or the institution wins.

    ■ Staying out of the sharemarket, perhaps in favour of cash or bonds. Yes, the credit crack-up was confronting but you need growth assets such as shares and property to reach your goals. The key is to balance these with more stable, income-producing assets. The fortunes of markets can turn on the head of a pin – witness the 20 per cent share recovery in the past year – and you need to be invested to benefit. Remember this applies to your super, too.

    ■ Over-leveraging. Heed the main lesson of the global meltdown and use investment debt sensibly: limit it to an appropriate amount and have the means to cover it if a market turns hostile.

    And the big one:

    ■ Year after year using credit to spend more than you earn. This short-sighted behaviour has the greatest potential to sabotage your future. To be a financial success you don’t need to be particularly clued up, but you can’t be clueless, either.

    The last point might seem simple, but it can be tempting to bury your head in the sand about what your incoming finances actually are, and live your daily life on credit, spending more than you earn.

    This thinking isn’t limited to those with a low income. In fact, Australian Bureau of Statistics reported late last year that spending more than you earn can occur across every level of income.

    “One in seven Australian households is spending more than it earns, as the working poor struggle with monster mortgages and surging power bills.

    Nearly 8 per cent of the nation’s richest households were living on credit, the Australian Bureau of Statistics reported yesterday.

    Of the top 20 per cent of households earning the most money, 3 per cent could not afford to pay a gas, electricity or phone bill on time during 2009-10.

    Of the poorest 20 per cent of households, one in five could not pay their bills on time and one in four spent more than they earned,” it was reported in news.com.au in the story News.com.au ‘Aussie strugglers living beyond means’.

    And the end result can be the same. People can bomb out with their finances at every level. And Creditors don’t care what your income is when you’ve defaulted on your credit, only when and how you intend to pay.

    If you have over-extended yourself – even if it hasn’t yet made it to default stage – act now to reduce that debt. Make a plan – find a good financial counsellor (call ASIC’ financial counselling hotline on 1800 007 007 for a reputable one) – and make some tough decisions about your life. By all means necessary, avoid that default or any other impairment to your credit file.

    What Ms Pederson-McKinnon didn’t mention, is another way you could be sabotaging your own financial freedom – by living with defaults on your credit file that shouldn’t be there. A default on your credit file will give you 5 years of blacklisting from mainstream credit, meaning if you need credit during that time you will be paying thousands more (on an average home loan tens of thousands more) in interest over the term of the loan.

    By having your credit file reviewed by a credit repairer to check your suitability, you may find you are one of those lucky ones that is able to have their credit default removed. This process happens legitimately and legally by people who are experts at auditing your Creditor for compliance issues which can deem your credit listing unlawful and therefore removed from your credit file.

    Contact a Credit Repair Advisor if you need more information on credit repair 1300 667 218.

    Good luck with your own path to financial freedom.

    Image: digitalart/ www.FreeDigitalPhotos.net

     

     

  • Seven habits of highly frugal people

    seven habits of highly frugal peopleIn this ‘Make Credit Work For You’ post, we look at what an expert recommends as good money habits. No matter what income you are on – Finance Blogger David Ning says it is what you do with that income that sets you apart and means you have a better life. His views were featured in news.com.au this week and we look at what those seven habits are, and how you can improve your dealings with money and protect your finances and your credit file for a better life.

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

    You don’t have to be poor to be broke, and statistics prove it. In September last year the Australian Bureau of Statistics revealed that nearly 8 per cent of the nation’s richest households were living on credit.

    Of the top 20 per cent of households earning the most money, 3 per cent could not afford to pay a gas, electricity or phone bill on time during 2009-10. See more in the article ‘Aussie strugglers living beyond means.’

    Living this way is living dangerously. Often you are said to be robbing Peter to pay Paul. If something goes wrong, you can run a real risk of getting into arrears and copping a default on your credit file – or worse.

    The secret of not living paycheck-to-paycheck (or card repayment to card repayment) is by following some simple life habits.

    Frugality doesn’t mean giving up luxury and the things you love but changing your attitude towards money.

    David Ning says that the well known 7 habits of highly effective people can be adapted to become the seven habits of highly frugal people and help you live a happier and more frugal lifestyle.

    Here are those 7 habits of highly frugal people as featured in news.com.au:

    Habit one: Be proactive Mr Ning compares the habits of highly frugal people to the seven habits of highly effective people and the first step is to take responsibility.

    Quit blaming your childhood, your school, your boss or the Government and accept that you are in control of the direction of your life.

    The more you ignore the situation, the worse it will get.

    “Take a long hard look at your finances — your budget, debts, income, and expenses, and try to understand where your money is going and where you can budget better,” writes Mr Ning.

    Then you must tell people of your hope of being more financially stable which can help you focus on your goal and avoid the peer pressure that makes budgeting and frugality hard.

    Habit two: Begin with the end in mind Those who are successful in reaching their goals are those who can envisage them from the beginning.

    “If you don’t visualise what you want, then you’re at risk of other people and external circumstances influencing your life – because you’re not influencing it yourself,” he says.

    You must decide if your goal is to be debt free, build a savings account of a certain value, or live on one income in a two-income household.

    Then decide how you’re going to get there. This involves identifying obstacles standing in your way such as credit card debts. Or behavioral obstacles such as spending $10 every day on junk food.

    Habit three: put first things first Knowing why you’re doing something can help make you do it and that means knowing what is most valuable and worthy to you. It’s a lot more difficult to say “no” to something if you don’t know why you’re saying no and not focused on what’s important to you.

    It’s easy to spend more than your budgeted amount each month when you put everything before your finances such as “worrying about missing out on a dinner with friends, feel as though you have to cater a birthday party for your son and 50 of his closest friends, or don’t want to wear the same suit to a work conference two years in a row.”

    It’s important to be able to “just say no”.

    Habit four: Think win-win Don’t compare yourself to others and constantly compete with others. Instead, it’s better to have a win-win mindset which will allow you to see mutual benefits from all your dealings with people and realise that there’s enough for everyone to benefit from situations.

    Don’t think “it’s not fair” that others have a better car or a bigger house because you don’t know the whole story – and it could just be a façade for covering their huge debts.

    It’s important to focus on your own finances and know you’ll get to where you want to be some day.

    “True wealth is not measured in possessions, but in assets. When the value of your assets is greater than the amount you owe on mortgages, car loans, and credit card debts, then you have a strong net worth and are truly wealthy.”

    Habit five: Communication Listening with the intention to understand can help you reach your goal of frugality. “Don’t just wait for your turn to talk; pay attention to what people are trying to tell you,” writes Mr Ning.

    To be effective in your goal of frugality, you need to be able to listen to and understand the goals and behaviours of the other people in your life. If you’re saving but your partner is spending like crazy then your behaviours offset each other and you won’t reach your goal.

    Instead understand the needs of the people in your life and work out a way to be more frugal without them having to give up the things that are most important to them.

    Habit Six: Synergise Synergising is the habit of working as a team to get better results than if you were working on your own.

    When you have genuine interactions with people, you’re able to gain new insights and see new approaches to your problems — ones you might not have thought of before.

    Talk to people to discover new ways to do things and processes that can really help you save money. Surrounding yourself with like-minded people can help.

    “Find people who are where you want to be by joining online frugal-living forums, striking up a friendship with a fellow coupon-cutter, or starting a sewing club,” writes Mr Ning. “When you’re around people with the same goals as you, you’ll be able to share ideas and learn from each other.”

    Habit seven: Sharpen the saw In order to maintain all these habits and achieve any goal in life it’s important to look after yourself physically, emotionally, mentally and spiritually.

    This can be done frugally too by: eating better by starting a vegetable patch; exercise frugally by going for a walk or jog; interacting socially to make you feel better emotionally; exercise your mind by reading or volunteering; and spend time close to nature and expand your spiritual self through meditation, music, art, or prayer.

    Image: Feelart/ www.FreeDigitalPhotos.net

     

  • How to cure Christmas credit hangover

    cure Christmas credit hangoverIn 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