Simple Tips to Get Your Credit Rating Back On Track
Recent world events have put things a ‘little off centre’ over the last 12 months for many people. Not only limiting our ability to travel, but impacting the places we work, the cost of products and services & much more.
For some it’s meant changes to income levels too, how they are paid, how often they’re paid. The flow on effect of this is that people who’ve never previously experienced financial challenges have found themselves having to closely monitor their money to avoid any impact on their credit rating. The Banks take a very keen interest in your credit rating.
If you’ve found yourself in this position, know someone who is, or perhaps know your credit rating isn’t looking as good as it once was, we’ve got 4 steps you can action to get things back on track & help you to avoid any future credit issues.
1. BE PROACTIVE
There’s no use burying your head in the sand. Firstly, you definitely won’t be able to breathe, & secondly things most certainly won’t look any better when you decide to resurface. Reach out to the companies whose payments you are struggling with, explain the situation, assure them you’re actively working on getting things back on track. Then ask if they have any options available in these types of situations. Many companies will extend due dates, or offer low interest repayment plans which can give you the breathing space you need in the interim.
However, most importantly you’re showing the company you’re aware of the situation & are actively working on a solution. This can be the difference between a company working with you rather than writing you off i.e. sending you to the collections department, or registering your debt/missed payments which will negatively impact your credit rating.
2. DO THE NUMBERS
So, once you’ve spoken to the companies & know what’s available to you. Then it’s time work out a plan as to exactly how you’ll repay the debt. That means doing a budget. The great thing nowadays is there are so many budgeting tools & apps available online. This makes it a lot easier to do than it once was & you can break things down to weekly, fortnightly or monthly depending on your pay cycle.
3. organise your bank accounts
The best way to make sure things get back on track & remain on track is to make sure you have a separate bank account for your bills. With bills falling on different days of the month, which often doesn’t align with your pay schedule, things can easily get out of hand. It’s important each time you get paid to put money aside into a separate account, to guarantee you have enough funds available at the right time. Make sure you arrange for as many bills as possible to be paid automatically via automatic payment, or direct debit.
To full proof this method even further, we recommend that you don’t have this account loaded on your debit cards. As the balance grows over the month, sometimes it can be tempting to dip in from time to time, which will end up causing you more headaches in the long run.
Also don’t forget those less regular bills like car registration, rates etc. Even though you may only pay them once or twice a year make sure you’re putting money aside each month to cover them.
4. communicate your plan
Once you’re worked out how you’re going to get things back on track. Make sure you get in contact with the companies you owe & let them know how you’ll be repaying the debt. Often, you’ll have these conversations over the phone, however it is also advisable to put it in writing to the company by simply emailing them, noting who you spoke to, when, & what was agreed upon - so that there is also a written record of what was discussed in case there is any need for it in the future.
- For bills that change throughout the year like power, gas etc. Take a look at your previous 12 months costs & average them out over the year, then put this amount away each week or however it aligns with your income, so that you aren’t having to come up with ‘extra’ money, for things like your electricity use as it increases over the colder months.
- Schedule a time to fully review your finances at least twice a year. Don’t just review your budget, but even look to see if you can get a better deal by changing providers.
Taking time to get things back on track is well worth the effort. Once things have been up & running for a while managing your finances will become as simple as ‘set & forget’ with a few reviews along the way.
And remember, your past doesn’t have to predict your future, so no matter how out of hand your finances may currently be, with a little bit of effort you can get things back on track & reduce your stress.