Credit, managed sensibly, is a very convenient way to manage your money. Providing you don't spend more than you're earning and you repay credit reliably (within the interest free period on a credit card, for example) it can be a great alternative to cash. The price for this convenience is interest. This varies considerably between financial institutions and is an essential consideration when deciding how much credit you want to use.
If you've applied for some form of credit in the past few years, from a mobile phone account to a personal loan, you'll have a credit file.
A credit file is a snapshot of your financial history that's supplied to anyone who may provide you with credit.
Your credit file is a very powerful thing. Even if you've built up a good credit report, any missed payment or default, no matter how small, could result in a denial of credit, maybe for years. So it's really important that you keep up to date on all your financial obligations and don't overextend yourself.
Credit companies use the information below, together with what's in your application, to determine your credit rating. Details include:
They then decide if you can be considered a 'good credit risk'. A good rating means better credit terms, so you can borrow more money, while a poor rating could end any chance for you to obtain credit.
All overdue account listings, even as low as $20, remain on your credit file for 5 years from the date of listing. Even if you pay an overdue amount in full, it won't be removed from your file for 5 years. And that could affect your borrowing potential in the future. So it's much better to keep up with your payments.
If you borrow money, you're in debt. Debt isn't necessarily a bad thing as long as you stay in control of it. If you can make your repayments, it's not a problem. But if you dread trying to make your repayments every month, you need to take action, and the earlier the better.
Firstly, write down all your debts/loans and find out what interest rate you are paying for each one. You'll be surprised how expensive some debt is!
Find a cheaper interest rate and consider moving all your debt into one personal loan or credit card. Would this make a significant difference to your repayments?
If you're still worried, drop into a branch and we'll try and help you sort out your debt mountain. You're not the only one in this situation, but if you leave it, it might just get worse.
You're entitled to a copy of your personal credit file. You have to pay for quick service, but if you're happy to wait for 10 days, you can get if for free. They're worth checking, because if you find any mistakes, you have the right to have them changed. To get a copy for free, you need to provide:
Check out your credit file here.
If you're struggling with the amount you have to repay each month, don't ignore it. The sooner you ask for help, the easier it will be to fix. Most banks have procedures in place to help customers in financial difficulty and they can offer you a lot of options - setting up savings plans, reducing repayments, giving you an extension or transferring your debt into another type of loan. Just remember to be honest and upfront.