A healthy credit profile is something we would all love to have. How we handle our finances determines our credit worthiness and little financial mistakes and lapses can snowball into major problems.
Improving your credit record becomes harder the longer you leave it.
It’s nasty to get an “Overdue” notice in the mail. Even nastier being added to a “slow payer” or “credit risk” list. Too many small lapses in your financial life can build up and cause huge problems when you least expect them.
How about this: You decide to open a small business. It’s all going to plan when suddenly the landlord is not prepared to rent his shop to you. Big shock! How could this happen?
The landlord has done a background check; you have no outstanding payments, but your name is on one or two lists and you look too risky to deal with.
Can You Improve Your Credit Record?
Even if it’s good, it’s wise to improve your credit as much as possible.
If it’s bad, how easy is it to fix your credit record? A bad credit rating can be fixed, but it may take a while. Keep in mind, people want to do business with you, but the only way they can know if you are a good person to work with is by looking at your track record – your credit profile.
Improving Your Credit – Five Rules to Live by
If you find yourself with a failing credit record, these pointers will help you on the road to recovery and get you onto solid ground.
A vital key to creating a strong credit record is having the right attitude to money: You have to earn it, manage it and eventually make it work for you.
Here are five keys to getting out of debt and improving you credit score.
Don’t be a Sucker – Live within Your Means
Advertising people work very hard to convince us that we deserve to live like rock stars. The hard fact is, very few can afford it and even rock stars go broke.
Do everything in your power to spend less than your income each month.
Tough budgeting is key. Be realistic and be honest. Plan your spending, factor in a specific percentage for savings (there will always be contingencies and emergencies) and then make your budget work.
Get a Second Job
If, at the end of your budgeting exercise, it’s clear that you just cannot repay your debts and meet your obligations on time and in full with what you earn, look for ways to make extra income. In short, get a second job.
Beyond your immediate dilemma, taking a second job will help make you partly retrenchment proof and make having an extra income stream a habit.
Never be Late with a Payment
Discipline is essential to getting back on your feet. One of the best ways to stay on track is to make all your payments on time. You may be tempted to hang on to your hard earned money for a few days – don’t. It’s not really yours and missed or late payments were probably part of the initial problem. This is also one of the critical areas in improving your credit score.
Part of your budgeting exercise was knowing who needed to be paid how much and by when. Use this list as a monthly guide to ensure that all your obligations have been met in full and on time.
Communication is the Glue
When you have completed your budgeting exercise, one of the most powerful things you can do is communicate. Your creditors and your bank manager all know that you are in financial difficulty, but they also need to know what you are doing about it.
Letting them know that you are committed to sorting out your affairs will keep them in the loop and be a big help in keeping you on track. Arrange meetings with them and show them your plan. If there are some commitments that you quite simply cannot meet in full each month, negotiate a smaller payment over a longer period.
If your creditors think you are ignoring your problems they will hand you over to the debt collectors – you will pay for the pleasure.
Get Professional Help
If your financial situation has been deteriorating over a long time, or you have debts that are pushing you to financial ruin you may not be able fix the situation alone. This is not a good time to panic. Get professional help from an institution like the ACCC
Getting back on your feet has to come before you work on improving your credit rating. Highly qualified debt counsellors are available to help you structure your recovery. Again communication is key to arriving at a workable plan.