MyCRA Specialist Credit Repair Lawyers

Tag: your credit file

  • 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

  • How to Avoid Sexually Transmitted Debt

    sexually transmitted debtBeing ‘in love’ is one of the best feelings in the world, but not one of the most practical states to be in. Sometimes personal financial values go out the window and people lose themselves in the process of adding to the ‘relationship’ and creation of ‘us’. But at some point the boring old finance stuff becomes vitally important. We look at what you need to do to prevent STD impacting your credit file.

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

    Many people run into trouble by not asking the tough financial questions about their prospective partners early in the relationship. Your financial generosity now could become the very thing that is used against you if the relationship sours. Before you enter into any financial transaction, consider carefully how secure you would be if things did take a turn for the worse.

    What’s your money personality?

    Are you a spender, a risk taker, a saver or a security seeker? There are many different types of money personalities – and you could be combination of both. If you and your partner are different money personalities, this may be the cause of arguments.

    When two different money ‘personalities’ combine, it may be all rosy to begin with, but at some point you are going to disagree about money. Fights can begin and the potential for both of you to be financially damaged is greatly increased.

    According to Relationships Australia, conflict over money is one of the top causes of arguments and relationship breakdowns in Australia.

    When there’s joint finances involved in the split, sometimes you can continue to fall under the financial shortcomings of a partner well after the relationship is over.

    When people take out any credit together, such as loans, utility accounts, homes and rental properties, they become very reliant on the partner to keep up their end of the credit repayments.

    Who is liable for debt?

    Sometimes one partner ends up with a bad credit score, simply because the other person on the account has not kept up with repayments. People can be unaware their partner (or ex-partner) is generating defaults on their credit rating until it is too late.

    The most common type of negative listing is a default, and is placed by the creditor when an account holder fails to make payments past 60 days.

    In many instances it’s not until people apply for credit in their own right that they find out they have a default against their name. The relationship may even have ended years ago and the partner is still paying for it.

    Bad credit history can last for 5-7 years, depending on the listing type.

    Many people come unstuck by not asking the tough financial questions about their prospective partners early in the relationship.

    How to Prevent Relationship Debt

    1. Consider taking a Money Personality test, such as the one at www.TheMoneyCouple.com

    2. Ask about your new partner’s financial past. People will do what they have always done. If they have financial skeletons in the closet it is possible they will continue this behaviour in the future.

    3. Ask what debts they currently have. This will give you an indication of how they feel about money, and how much debt they consider normal to handle. Does this match with yours?

    4. Talk about paying bills. Do they always pay them on time? If not, why not? This will give you a good indication of how this person regards money and credit repayments. Ring any alarm bells yet?

    5. Ask what their financial goals are for the future. Do they match yours? If your new partner wants to blow all of their money on an overseas trip, but you want to save for a home – how will this work long term?

    6. Verify their answers about existing and past debt. Ask them if you can see a copy of their credit file (and versa of course). A copy of your credit report is free every year from one or more of the credit reporting agencies in Australia. It will be sent within 10 working days. You can order your credit report here http://www.mycra.com.au/credit-file-request/.

    If you are unsure of your new partner’s financial compatibility, it could mean finances need to be fairly separate for a significant period of time.

    But the most important aspect to the meeting of financial minds is to keep an open dialogue about money. Talking freely and honestly, preferably keeping the emotion out of your discussions may help to avoid surprise bad credit from your partner.

    Image: David Castillo Dominici/ www.FreeDigitalPhotos.net

  • How healthy is your credit rating?

    Your credit rating is just like your health.  You can get regular check- ups and maintain it, or you can wait until something goes wrong before you get it fixed. Knowing what’s on your credit file is the key to your financial freedom. Maintaining that credit file health will ensure you are able to continue to enjoy the benefits of obtaining credit now and for years to come.

    Graham Doessel, founder and CEO of national credit repair firm MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au addresses some common questions about your credit file.

    WHAT is my credit rating?

    Your credit rating is really a file on your credit history, and is collated by the major credit reporting agencies on anyone who has ever been credit-active.

    Your credit file is then checked by any credit provider and is used to assess both the amount you are able to borrow and your ability to repay the loan.

    How do I find out what’s on my credit file?

    There are four major credit reporting agencies in Australia: Veda Advantage – which holds the credit file of over 14 million Australians, Dun and Bradstreet, Experian Australia and Tasmanian Collection Service (TASCOL) if in Tasmania.

    By law you are entitled to write to or email one of these agencies and request a copy of your credit file for free. It will take 10 working days from application to receive this information, or for a fee it can be provided within 3 working days.

    What is defined as a ‘bad’ credit rating?

    In broad terms, any defaults, clear outs, court Judgments or writs, external administrations and bankruptcies 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 bad credit history.

    How do I get a bad credit rating?

    What is not realised by many people is how easy it is to have a default slapped on your credit file – which will show up as bad credit history.  If a bill 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 intentions to record this default on your credit file. Even if this bill is paid, the default usually remains on your record for 5 years.

    What are the repercussions of having a bad credit rating?

    A bad credit file can severely hamper your chances of obtaining any credit. Your credit health can determine whether you can take out credit cards, personal loans, car loans, enter into mobile phone plans, and of course take out a mortgage.

    What can I do to fix my credit rating?

    After checking your credit file, there are three things to consider:

    1. The accuracy of the report.  If there are errors, however small, you have the right to have them rectified.  Likewise, if there are numerous strange defaults and or applications for credit that we don’t recognise – contact Police immediately in case of identity theft.

    2. Check you were informed of any intention to list.

    3. Check the fairness of the listing.

    If your file does contain defaults, writs or judgments that you believe are incorrect, unjust or just shouldn’t be there, there is a good chance they can be removed.

    You can work with your own credit file to have the defaults removed, or you can contact a third party ‘professional credit repairer’ to help you.

    How can a professional credit rating repairer fix my credit rating?

    If people find inconsistencies on their credit report, in the past they have run into difficulty trying to get the offending black marks removed.

    Listings are not removed by creditors unless the credit file holder can provide adequate reason and lots of evidence as to why the listing should not be there. Many individuals find it extremely difficult to apply the letter of the law in their own circumstances and so end up seeking someone out a professional credit repairer, who can work on their behalf.

    Credit repair requires knowledge of the legislation, lots of evidence, tenacity and perseverance – which a good quality professional credit repairer will have.

    Professional credit repairers have also built successful relationships with agencies and creditors alike, and have a better ability to negotiate the listing’s removal on the client’s behalf.

    What can I do to ensure I maintain credit file health?

    1. Pay all accounts on time. This is the easiest way to ensure there are no adverse listings on your credit file.  If you are struggling to make repayments – contact the creditor about a repayment scheme.

    2. Regularly obtain a copy of your credit file – once a year is recommended to ensure accuracy.

    3. Be aware of excessive credit enquiries. If you are not sure about your credit health, you should get it checked before applying for new credit.  Some lenders are rejecting loans for as little as two enquiries in 30 days, or six enquiries within the year. Also avoid ‘shopping around’ for credit, as whether or not the loan was approved doesn’t show up on your credit report – only the fact that you made the enquiry.

    If you are seeking advice on credit file health from a professional credit repairer, contact MyCRA Credit Rating Repairs on www.mycra.com.au or tollfree 1300 667 218.

    Image: Imagerymajestic/ FreeDigitalPhotos.net