Five simple steps to correct your credit score

If you’ve ever had a mobile phone, a credit card or any kind of finance – including a gas or electricity account – you’ll have a credit score.

Lenders check your credit score when assessing loan applications – the better your score, the more likely they are to lend to you.

Your score is based on factors such as:

  • money borrowed,
  • accounts like phone, utilities, etc.,
  • on time/overdue payments,
  • past credit applications.

The higher your score the better and you’re more likely to have loan applications approved and you may also be able to negotiate a better deal.

Conversely, a low score can influence a lender and make it difficult to secure a loan or credit.

Finding out your credit score is easy and it’s free. The government’s MoneySmart website provides details for reputable companies that can supply you with a copy of your credit report.

What if you find out your credit score is not looking too good?

Here are five things you can do to improve it.

  1. Firstly, what’s the story? Get a copy of your credit report. It shows things like:
    • credit products and providers,
    • credit limits,
    • repayment history,
    • bankruptcy and debt arrangements.

Ensure your details are accurate and up-to-date and contact the reporting agency to have errors rectified.

Now, review the information. Are there trends? Perhaps you’re paying bills according to your wage cycle even if that means being a few days late?

  1. Consolidate multiple cards and/or loans into one and cancel cards where possible. Fewer loan facilities are more manageable, it also looks better on your report.

Avoid applying for credit increases as any increase will add to your total credit debt. Additionally, applications for credit, and credit increases, are included in credit score calculations.

  1. Consider a ‘nil-interest balance transfer’. This is where you transfer your outstanding credit card balance to a new card offering zero interest for a limited time. Schemes like these enable you to quickly pay down debt during the interest-free period, but make sure you’re clear about the terms and conditions as penalties can apply.
  2. Where possible, reduce your credit card limits. Pay the full balance each month, or pay more than the monthly minimum when you can. Even the smallest amount can make a difference.

With personal loans, mortgages and council rates, pay on time – every time – and make additional payments whenever possible. Always pay rent and mobile phone accounts on time – it’s a recurring theme, isn’t it!

If you struggle to pay utilities by the due date, contact your provider. Many offer plans called bill-smoothing, where you pay a set amount each month. Goodbye bill-shock!

  1. Create a realistic budget based on your income and expenses, and include the due dates of your debts. This will help you synch your pay cycle with financial obligations. It will also identify any savings that you can use to pay extra on loans and cards.

A poor credit rating is not the end of the world, but repairing it can take time and discipline. If you’re not sure where to start, seek professional advice. It’s all about managing debt, prioritising and making your credit score work for you.

Are you investing or gambling?

Investing in different asset classes such as equities, commodities, and fixed-income assets is a great way to accumulate wealth, but it is important to have a sound investment strategy in place. This article covers five warning signs that you may be gambling instead of investing.

 

Are you investing or gambling?

The potential financial results of investing can feel limitless, and it can be tempting to think that just one stock pick could make you an overnight millionaire. Yes, stock-picking can have a place in your investment strategy, but if you’re focused on the allure of a “get rich quick” mentality, you may be gambling, not investing.

What’s the difference?

One of the key differences between investing and gambling is process and strategy. If you don’t have a process and strategy in place, it is a sign that you need to establish or refine your plan. Further, gambling focuses on emotions such as hope. Investing, on the other hand, is all about strategy. With a clear strategy, you know approximately how much your investments will grow and over what time horizons.

 

How do you know if you’re investing effectively?

If you’re unsure whether your current investment approach is working to realise your goals, think about your investment process and how many of the below five elements are included in your approach.

Not doing your research

If you’re not completing any research and putting money into assets based on tips from friends or what you see on social media, you’re exposing yourself to increased risk and not doing enough due diligence.

Investing in micro-cap stocks only

Micro-cap stocks typically have a market capitalisation under $500 million and are ranked from 350 to 600 on the Australian Stock Exchange. With a relatively small market capitalisation, buying stocks in these companies can be cheap. The downside, however, is that these companies are usually in their infancy and experience volatile price fluctuations. There’s a place for micro-cap stocks in your investing. However, if you’re putting all your money into these companies, you’re likely exposing yourself to unnecessary risk.

Investing with short time horizons

Putting all your money into short-term investments or activities such as ‘day trading’ is an indication that you’re too focused on short-term gains without a long-term strategy. There’s a place for short time horizons in your investing, but only once you’ve mastered the foundations such as establishing a long-term plan and ensuring you have adequate cash buffers.

Lack of diversification

If all your money is invested in one asset class, you’ll be over-exposed to volatility in a single market. To ensure your money grows consistently over time, your money needs to be balanced across a range of asset classes and sectors.

Not having an investment strategy

If you don’t have an investment strategy, your investing won’t be as effective as it could be. To start putting together an investment strategy, you need to think about things such as:

  • building up adequate cash buffers;
  • how much money you need invested to live comfortably off your returns; and
  • when you anticipate you’ll start drawing an income from your investments.

 

Moving forward with a long-term wealth strategy

Investing in different asset classes such as equities, commodities, and fixed-income assets is a great way to build long-term wealth. To build this wealth, however, you need a strategy and process to follow.

If you’re unsure how to develop an investment strategy, be sure to seek qualified financial advice. Investing in this advice now can reap great rewards in the years to come, ensuring your money is working to help you realise your financial and lifestyle goals sooner.

 

Super Success for Women

While many women will earn less and spend less time in the workforce than men for a variety of reasons, affecting their super contributions throughout their working lives, there are some simple steps women can take to boost their retirement savings.

Sadly, this is something too many women ignore. According to The Association of Superannuation Funds of Australia, the average super balance for women at retirement is just $213,140. In comparison, men retire with an average balance of $292,000 – almost 30 per cent more.

Low retirement savings are a key reason why more than 80 per cent of women retiring in Australia do so with insufficient funds to finance a comfortable retirement, with almost half relying on partner’s, family and social security to support them in their later years.

 

The Simple Facts 

This extreme inequality is simply due to women earning and working less. Women in full-time work earn on average 18 per cent less than men, while almost half of all women in the workforce work part-time with an estimated 220,000 women missing out on any super contributions each year simply because they earn less than $450 a month – the lower threshold for super guarantee contributions.

Women also miss out on super contributions because they are often absent from the workforce for extended periods while on maternity leave or looking after loved ones, be they children or other family relatives.

When they do return to the workforce, it is frequently in casual positions or working for themselves, where the need to make super contributions is so often overlooked.

 

Check your super fund’s fees and charges

The solution lies with women taking control of their super and choosing an appropriate super fund, with competitive fees and investment options which meet their needs.

Regularly check what, if any, personal insurance premiums are paid from your precious super savings. While insurance is essential while you are raising a family, as you get older, you might find your need for insurance diminishes to a point where you don’t need it anymore. You may be able to cancel some or all or your coverage and with it the cost of premiums to your super. (Remember to always check with your adviser before cancelling any insurances.)

Make sure you take the time to see if you have multiple super accounts you can consolidate into one super fund to reduce costs. Care should be taken to check what insurance you have before consolidating. Visit the Australian Tax Office to see what super accounts you have or ask your adviser to do this for you.

Wherever possible, ensure you continue to make contributions throughout your working life, starting as early as possible and not neglecting your superannuation during periods when you are out of the workforce, working on a part-time basis or self-employed.

 

Maximise Your Contributions 

Make sure you speak to your adviser before the end of the financial year to maximise your contributions, and in doing so, minimise your tax bill. Check whether it makes sense for your partner to make spousal contributions on your behalf.

If you expect your income to be less than $54,000 in a financial year, make sure you take advantage of the Federal Government’s co-contribution scheme. By putting just $20 a week of after-tax income into super, you may receive up to $500 from the Government directly into your super account as soon as you lodge your tax return.

That’s a guaranteed 50 per cent return on your money and the best investment you will ever make.

If you are earning less than $37,000 a year, if you also make concessional contributions to your super fund, you should receive the Federal Government’s low-income superannuation tax offset of $500 directly into your super fund. You should check your superannuation account to make sure these payments are there.

And, as a final fallback, remember if you are age 65 or older and sell a family home that you have owned for 10 years or more to downsize, you can contribute a further $300,000 into super—giving a much-needed boost to your super savings.