It’s possible you have lost a little control of your finances in the past two crazy, COVID years. And it’s very possible it’s not your fault.
But it’s time to regain control.
Also by Nicole Pedersen-McKinnon:
Here are the five best and easiest ways to do it.
Fix 1: Ditch your credit card debt
If that credit card balance has been creeping up and up every month, rather than you being able to clear it, it’s time to take action.
You can currently get a 0 per cent balance transfer, which allows new credit card customers to pay no interest whatsoever on a debt they shift across, for a period of up to 36 months.
These cards give you a window of opportunity to have every dollar you repay come off your balance, rather than going in interest.
You can use a 0 per cent card to ‘zero out’ your debt by dividing what you owe by the number of interest-free months, and doing your utmost to repay that amount each and every month.
If you can’t manage that, however, you could execute a second 0 per cent balance transfer, to a third institution.
But don’t move more than twice, because it will impact your credit score too much.
Speaking of which…
Fix 2: Repair your credit rating
If you took a home loan holiday when the pandemic exploded, hopefully you don’t have those repayment pauses marked on your history? Check back to Part 1 to see.
However, you might. And you very likely will if you struggled to pay any other credit or utilities bills.
Any late credit payment or utilities default will depress your credit score and affect your ability to get a loan - and even a phone - in the future.
Check your full credit report - which now also includes your credit score itself - and double check. You can get this free, now every three months, at Australia’s three ratings agencies: Equifax.com.au, Illion.com.au or Experian.com.au.
If there are errors in your report, it’s actually happy days. These can be corrected with those agencies themselves.
Late credit payments will automatically drop off your record and stop hurting you after a two-year wait.
Any utilities or other bill defaults will suppress your score for five years. (You can find out what is classed as ‘late’ and a ‘default’ here.)
In this case, it’s a waiting game. Just don’t make the mistake, as I alluded to earlier, of applying for too much credit in the interim - that will drive down your ‘magic’ money number even further.
And beware of using buy-now, pay-later (BNPL) services, too. Although it slips through the cracks of the Consumer Credit Code, it’s said an inquiry by a service on your report could instantly push down your score by 150 points or more.
Besides, on a day-to-day basis, it’s simply too easy to lose track of what you rack up with BNPL, particularly if you have more than one service. Check Part 1 for how to recognise if you have a delay-pay dependency.
So, step away from Afterpay.
Fix 3: ‘Fess up’ about financial woes
I know it’s the last thing you’d expect to be smart, but all credit providers must have dedicated hardship departments - so tell them if you’re struggling and they’ll cut you some slack.
If you know you’re not going to make a payment, don’t wait 15 days until it becomes a black mark on your credit report and is reflected in your score.
Call or email the provider and see what they will do for you.
Some lenders are still offering deferred repayments in 2022 or you might be able to get a temporary freeze on credit accounts for three to six months.
Just note that changes to credit reporting, applying from July 1, mean you won’t be marked as ‘late paying’ under any formal hardship arrangement.
However, you will be flagged as having a ‘special’ arrangement, and any potential new lender will have questions.
That you had ‘hardship’ will be deleted from your record after 12 months.
And in a big positive, the arrangement can’t affect your credit score because the credit bureaux are prohibited from including this in their calculations.
Fix 4: Take up the free financial help
At the onset of the pandemic panic, the Government restored funding to boost financial counselling services.
Available through the National Debt Helpline, or by phoning 1800 007 007, an amazing local counsellor will go into budgetary bat for you.
They can advocate with your every provider for financial-hardship provisions. They can accelerate your case and assistance with Centrelink. They can even restructure your finances so they are sustainable into the future.
If your situation is serious and stressful, get in touch today.
Fix 5: Build a ‘Holy Sh*t’ fund
Sh*t happens. Cars ‘blow up’, fridges and washing machines break, emergency dental work is required, essential medical expenses crop up.
You need a buffer of bucks to be able to cope and not have an urgent personal situation become an out-of-control financial one.
Slowly and surely begin to build a ‘Holy Sh*t’ fund so you are never again sailing so close to the (wealth) wind.
Having a cash stash equivalent to six months’ salary is ideal. But any amount could help.
And if you have a home loan, house this in an offset account attached to that loan. This will save you lots of juicy loan interest on the way.
As we hopefully put the global health crisis behind us, it’s time to get healthy finances again.