Melissas blog

Melissa: Are you lowering your credit score with these 2 mistakes?

2009-11-27T12:31:00Z

Are you making these mistakes below? Today I'm going to share two pieces of advice. By making these easy to implement changes changes you can drastically change your credit score for the better, starting today.

1. Paying The Minimal Amount

A crucial variable in the credit scoring algorithm is the management of credit cards. The calculation is basically the difference between your credit limit and the amount used. Living in the 21^st century and considering the risks of carrying cash around, I would assume that most people have credit cards available to them. There are a few errors we make in the management of these little tools however and one, is not paying the minimal amount due. Ensure that every month when the payment is due the amount is paid in full.

What effect does it have on my credit scores if I pay minimal pay due is not made? Well, by not making minimal payment due, you are effectively telling the bureaus (Transunion, Fair Isaacs, Experian, etc) that the amount you are paying is all you can afford and not the amount that the amount the initial credit was approved on. Effectively, by not paying minimal, you slim your chances of getting a good score or improving your current score.

So you say that if I can't pay more than the minimal balance I should settle the account and cancel the card? Not at all. If you are trying to better your credit score you need to show you're good with credit. If you struggle with your payments then perhaps lock your card up in a safe, or cut it up but NEVER cancel the card. This way you're not using the card but the card is still ‘working' for you. The facility by being opened, gains you points towards your credit score.

2. Paying Late

Ensure that payments that you are responsible for are settled on time. It is crucial that bills are settled in full when they become due as you literally overnight can drop your credit score by a single late installment or payment.

I'm so busy though, I always forget. Surely this isn't a big deal?

It does make a big difference. I understand - we're all busy that we tend to forget crucial bills that we might mentally diarise to pay. If this is you, then I strongly suggest you either get debit orders linked to those transaction, or use post dated payments on Online banking. For the less forgetful, I would suggest ‘Cellphone Banking'. It's convenient and with FNB, it's free!

Correcting these mistakes is vital in changing your credit score. Over the next few months I'll be sharing additional pointers with you so follow this blog and let's get your credit score on track together.

I don’t look like Gabrielle Solis from Desperate housewives, so how can I get what she has? ...

2009-08-25T10:32:00Z

I was brought up in a conservative spending background; I was taught that if I wanted something, I had to save up for it and buy it cash. Having credit was taboo, but moving into an Analytics and Credit Scoring environment, has taught me a thing or two…

Times have changed and are constantly changing. We all want to live in plush houses and drive in safe, yet fancy vehicles. Though being able to pay for these luxuries in cash, is virtually impossible (unless you’ve been fortunate enough to have made a good catch … for the fans of Desperate Housewives…having the looks of Gabrielle Solis and living in a suburb like Fairview… )

Not having a credit is a huge mistake! Credit scoring systems are designed to reward consumers who manage credit responsibly. These rewards are in the form of easy access to credit, as well as lower interest rates.

Not using credit or not managing it correctly is a lost opportunity for building up a good credit history. Think of it from a different perspective, if you have never had debt, then credit providers have no understanding of how you spend money, thus to them, you are seen as a risk. ‘The higher the risk to the lender, the higher the interest rate, and possibly the inability of having the credit being approved.’ On the other hand, well managed debt can be seen as ‘future plush houses’ and ‘future fancy vehicles’…

One of the repercussions of having gone through a recession is that Banks and Credit Providers having to relook at how they score people, due to consumers inability to manage their debt correctly…so getting credit in the form of bonds, study loans, vehicle finance, etc is more difficult now than ever before and my gut feel is that it will get even more harder.

…so you see, having well managed debt is not bad. Over the next few weeks, I will teach you the difference between good and bad debt as well as how to manage your debt and how to eliminate common credit mistakes.

For more insight go to: http://www.credithealth.co.za/

Melissa’s Blog - The second most expensive item you’re likely to buy!! (Part 2)

2009-08-11T08:42:00Z

The first part of my blog, I gave you a few pointers to ponder upon and questions you should ask the dealer when purchasing a vehicle.

So…you’ve decided that you want to buy a used vehicle, what should you do and what should you be checking out for? Ladies, this one’s for you! Men are generally given the opportunity to play around with the car from the time they are about 10 years old, so they unfortunately given an added advantage and thus quiet often are familiar with what they should look out for…

Firstly, inspect the service history of the vehicle to get an idea of its condition,
A road worthy certificate is not a guarantee. Parts can be changed after the roadworthy test!
Odometer readings can be reset, so check that the claimed mileage is in line with the service log book.
Take the car for a test drive, listen for any unusual sounds.
Should the owner not have any service records, then random checks should be done. Check the tyres to see whether they are not worn out, open the bonnet, and check whether there no corrosions or that no oil leaks exist. Inspect the vehicle to confirm that it was not previously in an accident. A simple test would be checking that all arch’s or points meet without any gaps or uneven links formed.
If you still unsure, get a mechanic or AA agent to access the vehicle

The next step would be paying for the vehicle!

Paying in cash will inevitably save you on interest any other admin charges but not many of us are that fortunate, so what other alternatives do we have?...Instalment loan, leasing (either operating lease or a finance lease) or my favourite, taking out an access bond on you homeloan!

> Should you opt for loaning or leasing, it would be advisable to check with the banks how much you would qualify for. Previously the qualification amount was based on gross income/salary, but with the introduction of NCA, the amount is calculated on individuals spending habits.

> I however am drawn to the option of taking an access bond and merely increasing you bond repayments! The interest on a bond is usually lower and the admin costs are basically non existent because they have already been covered when the initial bond was taken out!

Finally, closing the deal!

Use quotes from other dealers to negotiate the best deal. Bear in mind that car sales are down at the moment so you have greater leverage; use it to your advantage!
Don’t sign any agreements until you are certain. Signing an offer to purchase is a binding; that means once you’ve signed ownership will generally pass unless financing is denied!
Be prepared to not get the price that you had in mind so you must be prepared to either walk away or have in maximum budget to spend.
Lastly, get comprehensive insurance before taking ownership!

Happy shopping and safe driving! J

Melissa’s Blog - The second most expensive item you’re likely to buy!! (Part 1)

2009-07-28T08:57:00Z

A car is the second most expensive item you’re likely to buy after a home…though not much in-depth thought is put into the decision! Our emotions (and ego) get the better of us and before we know it, we’re shifting the car into gear and driving it home with us!

Whether you’re buying a new car or a second hand vehicle, there are a few ideas that I would suggest you do before making the commitment.

Shop around,
visit several car dealerships,
read the motoring section of the newspaper,
go online and read about the vehicle that you are considering to purchase,
know the price spectrum and deals offered,
compare makes, models and colours,
weigh out pros and cons of buying new versus buying second-hand,
get insurance quotes of the vehicle of choice.
It’s also advisable to know which vehicles are less risky (the lower the risk, the lower the insurance). If you are unsure of which vehicles are less risky, consult with insurance brokers.

Offers may vary so it is advisable to get written quotes to refer back to.

Should you have an existing vehicle enquire about trade-ins. Make further enquiries should you get feedback that seems too high or too low.

Ask about service fees, maintenance plans, extra charges and warranties.

Extended warranties can be negotiated, so too are other extras like sound system upgrades, anti smash and grab windows, paint protection, electric windows, etc.

Question the resale value of the car you’re buying. Some cars have a better resale value than others. You’ll be less likely to be surprised when you eventually do want to sell or trade-in the vehicle!

Planning a baby anytime soon?

2009-07-14T07:34:00Z

Having kids must be a wonderful experience. I don’t have any but hearing my friends go on about how much fun they have with their little ones, is enough to get one broody! J

While watching them grow on 3D or even 4D scans might seem exciting, are we really prepared financially on the impact of an addition to the family?

Off late, many women opt for C-Sections instead of natural birth, but not all medical aids cover this preference. Many medical aids only payout if the mother or baby’s life is put at risk. So if you’ve opted for C-Section, firstly make sure that your medical aid covers the costs!

But prior to the baby arriving, the mother-to-be is required to go through numerous medical examinations, some voluntary (extras) and other essential. Prior to check-up’s or tests; ensure you know what tests are being covered and whether your specific medical membership plan covers those cost.

(Generally 3D and 4D scans are at one’s own cost, thus one or two is more than enough)

Your monthly financial plan might just take a toll if you do not adjust your spending habits prior to your baby arriving. Some of the major initial costs range from car seats and baby carriers to prams and cots, but these are once of costs and the money can be recouped by selling them later on. The daily costs however may seem much smaller but will have a harder knock on your finances. These vary from baby nappies and wet wipes to toiletries and baby feeds! Remember also that babies are quiet demanding, besides requiring entertainment (toys, videos, songs, etc), they are helpless and need to be monitored almost 24-7, thus once maternity leave is over, a nanny or day-care is often required.

Two generations prior to ours, having a baby would merely mean an additional mouth to feed. Purchasing clothes was never a problem as the kids used hand-me-downs or the mums-to-be would knit or stitch them by themselves, but us living in the 21^st century, need to start school or college funds before the little one even arrives!

If I had to be realistic with myself, if I had to fall pregnant, for starters I would have to find a new home…living on upper levels of complexes is definitely not baby-friendly! Others might find that they need to revamp their studies or guest room to cater for the addition to the family!

So guys, baby brooding aside, all pregnancies should be planned because once the little ones have arrived, the cost never stops! J

Is it really free?

2009-06-23T07:11:00Z

Is what really free you may ask…well is anything really free? I’m sure I speak for many in saying that, we’ve all taken up cellphone contracts for the free gift that comes along with it…‘free Playstation 3’, ‘free home theatre’, ‘free plasma set’ ! If not a cellphone contract then maybe a 3G contract to get a ‘free laptop’…okay, okay…let me be a little bit more practical, purchasing a combo goodie pack for the ‘free lunch box’…

What am I talking about?? Marketing gimmicks!!! …we all know that there are hidden costs but the excitement of a ‘new toy’ just gets our heart pumping, before we know it, we’re walking out of the store with a big bag of unnecessary items (junk, if I may mention) in our hands.

Lets face it, we all know that we’re experiencing a recession, many companies have already forewarned their employees that increases and bonuses are expected to be much less that prior years.

We all know how to do the math but do we really do it…For example, how much is the cellphone contract costing you? (R315 per month for 24 months) …R7560, how much does a PS3 cost…on special, you would probably pay about R5000. Ask yourself; would you pay R5000 for a Playstation; secondly, ask yourself, are you really going to play with a PS3…I’m guessing that you answered no to the first one and maybe to the second one…

So what am I trying to say…evaluate the financial decisions that you make, ‘think things through!’ If the financial impact is significant, draw up a pro’s versus cons schedule. If not you’d always be chasing after a ‘few action figures’!!

The financial lifestyle of a woman…

2009-05-26T15:29:00Z

Have you ever interacted with a married person who finds out that their partner is having an affair…what advise do you give them? Is your advise something on the lines of “if they do it once, the probability of them doing it again is highly likely”, do you tell them that they deserve better and that they should leave their partner and move on with life?” Think again…your thought-line should be a little bit more detailed…would your colleague be able to cope with paying the bills on their own?

Consider this scenario, a couple married in community of property with two children. On dissolving the marriage, everything is split evenly, that includes a house, car, moveable assets (furniture) etc. A lot of compromising occurs at this stage.

You’ll probably be left with 50% of very little if you lucky! …

Here comes the problem, how will that women be able to buy an alternate property, remembering that even though currently the property market has gone down, property is still expensive, even if your colleague rents a place, they still need to pay a deposit, furnish the place, buy a car and still manage to keep herself and her kids within a comfortable environment! Would they be able to do it with minimal debt funding?

…Even though times are changing, and there has been a definite increase in the number of ANC marriages, we as women still need to have a “Plan B” independent of our partners…

….so what do I recommend? I’m my opinion; all women should have an emergency saving account that would allow them to live comfortably for approximately 10 to 12 month, and in monetary terms, it should be at minimal R100, 000.

So how do you achieve that? Your drive to achieve your emergency savings account should be a priority (and can veri depending on your responsibilities) thus depending on your financial status you could start of by putting away R500 a month and increase as your budget allows (ie: decreasing unnecessary expenses and bumping up your savings). I would strongly recommend that the emergency savings account be kept in an account which returns a high interest (eg: a money market account). As difficult as it may be in the beginning, you should try never to touch your emergency savings account as in doing, you defeat the purpose of the fund.

Ladies, it really doesn’t matter your marital status or your age, we all should have an emergency float. Achieving our set targets are merely goals thus taking initial steps of growing the fund elevate pressure when you are in a crisis situation.

Take control!

2009-04-06T09:02:00Z

When I was little my Granny would always say that you must respect money. We were told never to throw money, stamp on it or walk by it. If you saw money lying on the floor, we were taught to pick it up and put it into a donation tin or give it away to a beggar, even if it was just 5c. Her philosophy was to respect money. She’d say “take care of the pennies and the pound will take care of itself.”

However, I was taught in Sunday school that “the love of money is the route of all evil, it easily drives people astray” and it was there too that I was taught how to tithe. That meant 10% of everything! As a kid that was very hard but as one grows older, the act of giving is far more rewarding than receiving. But strangely enough, the more you give, the more you receive!!

In my twenty-something years of existence, I’ve been fortunate enough to have been exposed to a variety of financial situations, some directly in many areas in my life and others in people close to me. I hope you’ll be able to gain something from my tips:

Most of us go through life being ‘short changed’. I say, know what you are worth and expect to be remunerated accordingly. If you feel like you’ve been short changed, speak openly about it. If you don’t, it simply means that you’re happy and comfortable with what you’re given.
Knowing what’s going on with your accounts doesn’t mean that you have control of your finances. Put pen to paper and draw up an easy budget. Start with the basic essential items first and then expand on it. It might seem little, but do the maths: Helper cost: 4 weeks x R120 = R480, Bread & Milk: (8.50+10.50) x 7 days x 4 weeks = R532 ….see, it all adds up
You may quickly come to realise that if there are insufficient funds to pay off old debt then maybe it means that it’s time to say goodbye to the DSTV or the full time helper!

Having good credit history should always be a priority so live within your means!
Consolidated debt is not for everyone, if you do not know how to manage individual accounts; chances are that you will not be able to manage a ‘mixed basket’ which effectively means higher interest charges!
Pay off debt as soon as you can, you could reduce a 20 year bond to a 10 year bond!
Know what’s in every contract you sign, read all the fine print. If you’re unsure get someone to assist you. It is no use having paid short term insurance for 5 years but upon a claim have no payout based on an immaterial technicality. In the same token, once a year, call your insurers (short or long term) and give them your updated information ie: change of telephone numbers, etc. Confirm your conversation via fax or email and request an updated copy of your contract.
Analyse your bills or till slips, make sure that you are correctly billed.
Reward yourself monthly. Do what works for you, open a separate account and physically pay yourself every month. You could choose to spoil yourself once a year from this fund or you could use it as an emergency pool.
Take control! Don’t fall into the trap of having to pay one credit card off by charging it to another!!

I write with the intention of letting you know of the simple tactics I’ve used in my life; who knows, maybe you too could be 28 and ready to invest in your second property!