With 2018 representing a prolific year of changes in the financial services industry, one of the things that perhaps didn’t receive as much publicity as other news events was the change in credit reporting procedures. The changes, which were brought into effect from the middle of last year, resulted in borrowers and financiers being provided with access to a greater range of data.
These changes are deigned to better capture a borrower’s true credit worthiness. Therefore, when it comes to obtaining a car loan, knowing where your credit stands is crucial to your chances of securing finance. Importantly, it’s never too late to make improvements. So with these changes in mind, what can you do to get your credit back in order this New Year?
Understand your credit position
Before you can get on top of things and start to make improvements, it’s a great idea to know what areas need improvement. You don’t fall into the trap of bad credit without having a few bad habits along the way, so it’s these that you really want to address first. The initial step to address this is to have a copy of your latest credit report available, which will outline exactly what needs attention.
Various websites may provide you with a copy of your credit report for free, with the four primary credit reporting agencies consisting of Experian, Equifax, Dun & Bradstreet and Tasmanian Collection Service. It’s worth noting that each of these agencies may have different thresholds and criteria as to calculating your credit score.
Proof for errors
Surprisingly enough, it’s not unheard of for credit reports to contain mistakes and errors. In some cases, it is thought that as much as 25% of credit reports contain some form of mistake or another. Some of the common mistakes found on a credit report include: accounts exceeding their credit limit; incorrect late payments or collections; out-of-date personal details; and, account identity mix-ups, Should you identify any errors it’s important you contact the agency to get these rectified, as they are likely having a significant impact as far as your credit rating.
Automate your way to hassle-free payment
Most consumers who fall into poor credit ratings end up there because of missed payments and delinquencies on their loans. Every time you make this mistake, your credit score takes a hit. The best way around this is to start by automating your payments and/or payment reminders.
For example, whether it’s a reminder set on your phone, a reminder that is generated by your credit card provider or bank, or some other means, doing everything in your power to remember that payment due date is essential to uphold your credit rating.
The alternative is to set up direct debit with your financial provider so that you take the hassle out of remembering when bills are due. Be wary of course, not having sufficient money in your account at the time could force you into overdraft or delinquency, not to mention direct debit payments usually don’t take full advantage of your interest free period.
Budget and prioritise
It’s easy to get caught in a spiral of debt if you maintain an expensive and/or unrealistic lifestyle. If you’ve previously had issues in managing your finances, the prudent thing to do is establish a budget, with prioritisation attached to each item. Stick to the essentials, plus it always helps to make sure you have something saved up for an unexpected event or emergency.
If you don’t trust yourself to remove the unnecessary spending, engage a financial advisor to help you. Last but not least, if the cycle feels like it’s spiralling out of control and you’re not making meaningful progress as far as repayments, part ways with ‘easy’ financing options (e.g. credit cards), which can be abused and perpetuate the cycle. Last but not least, you will always have bad credit loans at your disposal, which can be used to rebuild your rating over time, however it’s best not to depend on these.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.