Can ASIC repair the credit repair industry?

The Consumer Action Law Centre has called for reforms to the credit repair industry to safeguard the interest of clients. Concerns for the industry have moved the Australian Securities and Investments Commission into the spotlight to regulate credit repair and eliminate rouge operators.

The report claims that credit repair companies are charging high fees and tend to complicate client issues instead of resolving them. Allowing ASIC to manage this industry will force credit repair companies to outline their duties publicly and publish fees, terms and other information on their website. ASIC can then appoint an Ombudsman to assist clients in lodging a formal complaint without having to go to court.

Read more about this on the Adviser website.

There’s still so much to learn about credit

A recent survey by credit agency Veda shows that a staggering 79% of 1000 credit active Australians are unaware of changes to credit reporting that took effect last March, an alarming number considering that more Australians are eligible for credit as their scores improve over the year.

Veda credit scores have improved to an average of 760 from last year’s 751, with risk of defaults improving from 15% to 13% this year. This came after 78% of the respondents admitted to have never checked their credit report. Individuals are strongly encouraged to harness the power of credit reporting, as it not only benefits the lenders, but the borrowers in such a way that they will have a clear understanding of their current financial standing.

Read more about this on the Adviser website.

5 Ways to Fix Bad Credit

When securing a loan, the last thing anyone would want is to have a default listed on their credit file. Debt or worse – bankruptcy can hinder you from securing a loan or line of credit. Mainstream lenders rely heavily on your credit file and if you have any of these listed against you, it can be an absolute nightmare. In such cases, is a credit repair even possible?

There are several things you can do to manage your default, improve your credit file or even repair it.

Check for discrepancies

Make sure you understand what is on your credit file. Understand what your current financial standing by dissecting your credit report. It is not uncommon for credit files to contain mistakes, and these can seriously affect your ability to secure a loan. Should you find any mistakes, do not hesitate to contact your credit reporting agency.

Contact your credit provider

Get in touch with your credit provider not only to clear mistakes on your report, but to negotiate paying off your debt so that it does not appear on your credit file.

Consolidate debt

You may have numerous debts with varying interest that are almost impossible to manage. The last thing you want to happen is to get defaulting payments for debts you can pay but cannot keep track of. Consider consolidating your debt into a single loan, making it a single payment for a low interest rate.  Now, you only have 1 debt obligation, avoiding defaults and making debt management much easier.

Credit repair

In rare cases where a default is listed because of identity – theft scams, you can help protect your identity and resolve these issues by getting in touch with your credit provider. Some credit reporting agency have package options that notify you when certain events are recorded on your credit file, alerting you of any fraudulent activity.

Build good credit

In the long run, your financial goals should include building wealth, and not just to catch up with your repayments. In time, you will also build a good credit history which will improve your chances of securing a loan. Meet your monthly financial responsibilities by spending only on what you need, and take on debt that you are sure you can pay.

Avoid Credit Card traps this Holiday Season

There are currently 15.5 million active credit cards in circulation throughout the nation. On the average, $22 billion is spent on credit cards every month, according to RateCity. They have come up with 5 important traps in credit card spendings throughout the holidays, causing financial collapse on the last month of the year. Here are the things you should avoid:

Shopping using your card is very different from shopping with cash. Be aware of your spendings as this is often overlooked when using credit cards. A better alternative is to use a debit card to control your finances while shopping.

Although convenient in the short term, minimum repayments are costly. Most credit card companies charge a minimum of just 2% of the card’s outstanding balance. Following this scheme takes longer to pay, as most of the amount is allocated to the interest.

Cash advance will cost you. Interest rates can go as high as 29.49%. Also be mindful of charges up front, such as withdrawal fees and interests.

Introductory and balance transfers can be costly if these are not paid religiously.

Be aware of Excess Fees; always inspect your bill meticulously for any hidden charges.

Ensure that credit card expenses are checked religiously. 11 months of keeping your finances in check can go down the drain if these pitfalls are not avoided this holiday season.

Read more on the Property Observer website.

Most disputes in the FOC are credit related

Majority of the complaints lodged by consumers to the Financial Ombudsman Service (FOS) are credit related products. Almost half of these complaints are credit card and home loan disputes, and a third of these are inability to pay mortgage.

Despite these news, there are several bright spots outlined by the FOS. Overall dispute numbers have decreased for the first time in four years, down by 5%. Investment disputes have been reduced by 25% as well. Financial disputes were also down by 22%, Disaster insurance claims have also reduced and fewer Australians are experiencing repayment pressures because of the low interest rates.

Dispute resolutions have been the utmost priority for the FOS, and it is good to know that 55% of these disputes were resolved within 60 days, and 73% within 120 days for the past year.

Read more about this on the Broker News website.

Dealing with Credit Impairment

In our system run by credit, it is easy to fall into a bad credit situation. There are various ways that people get labelled with bad credit, and once you get bad credit, it gets too difficult and almost impossible, at times, to get another loan. Also, when you have been fixing the bad credit situation and you think that you have already resolved the issues, it can still be difficult to get a loan approved. That is because the bad credit goes in your credit history, and it takes several years before it gets completely ignored by creditors.

It is important to take care of bad credit when it starts to happen so that it will not show up on your credit history. However, there are times when you get really stuck in a situation that prevents you to pay loans on time. For instance, you get sick for a period of time or lose your job. When you can, manage loan or mortgage arrears so they would not appear on your records. If you are trying to get refinancing, but still paying arrears, wait until you have at least 6 months of on-time payments before applying for a loan. Lenders look at your payments for the past 6 to 12 months before they consider your loan. The same is true for credit card or personal loan arrears. It is best to wait for the clean statements without missed or irregular payments on them.

In cases of defaults or judgements, getting a loan is not simple at all. They show up on your credit history for 5 to 7 years. If you have a very good excuse for the default, then you may still get a loan. In case of judgements, most lenders do take them seriously since they are court orders demanding you to pay for loans because you have breached the terms. You will most likely need a specialist lender in order to get a loan if there is a judgment seen in your credit history.

Getting under Bankruptcy Act Part 9 or 10 would also put a dent in your credit history. They go on your credit record for 7 years, such that even if you have fully paid your consolidated debts under Part 9 or 10, will still hurt your potential to get a loan approved. If you are in this situation, you will need a specialist lender to help you get a loan.

Any type of bad credit can give you a hard time looking for new loans or refinancing. But it should not be a big issue if you manage your arrears and unpaid debts well. In case you really need to get a loan again, there are specialist lenders that can help.