Johannesburg – It#x2019;s that time of the year again #x2013; organising the year-end events, finalising leave requests, the decorations are up in every shopping mall, and Boney-M is piped in relentlessly through every speaker. Then the advertising flyers start to arrive, thick and fast. Your pre-teen has a gift list that is longer than your growing to do list, and your teenager thinks she#x2019;s getting a fancy tablet for Christmas, despite your best efforts to redirect her.
The #x201C;silly season#x201D; is upon us. Even if your family doesn#x2019;t celebrate a religious or cultural holiday in December, the summer holidays can take their toll financially. No wonder then that some people stick it all on credit and bury their heads in the sand until the new year comes around. Don#x2019;t be that guy: Good credit management isn#x2019;t as hard or scary as it seems and you can make big changes with small, simple steps.
#x201C;Some people feel like they are at the mercy of their credit providers after an expensive month or two, but we say #x2018;knowledge is power#x2019;. It#x2019;s your credit profile, so own it. Get your credit report and start implementing some basic good credit management strategies,#x201D; says Jeannine Naud#xE9; Viljoen, executive manager of the Credit Bureau Association (CBA). #x201C;The law and regulations around credit in South Africa actually put consumers in the driver#x2019;s seat to best manage their own finances. You have certain rights, such as the right to a free credit report, and swift resolution in the event of incorrect information on your credit profile.#x201D;
Here are some tips on being a credit superhero.
Get the basics right
The first principle to always bear in mind in good credit management is not to bite off more than you can chew: Don#x2019;t apply for more credit like store cards and credit cards than you can afford. As a basic rule of thumb, it is recommended that you keep your total credit repayments (including your house bond or rent) between 20 percent and 30 percent of your income. For example, if you earn R5 000 per month, your repayments should not be more than R1 000 to R1 500 per month. If you are already struggling to make ends meet, don#x2019;t apply for more credit. And speak to your credit providers about your repayment plan, rather than missing payments. Never lie about your income or expenses on a credit application.
End on an #x201C;up note#x201D;
Even if you have a few big expenses to carry over the year-end period, you can still end the year on a positive note, and set the groundwork in place for a credit-savvy 2016. These #x201C;steps#x201D; are simple things, that you can do yourself, often without leaving your desk and mostly at no charge (depending on your personal banking fees structure for example).
Here are five easy things you can do right now #x2013; in the next five to 60 minutes #x2013; to set yourself on the right path in terms of your credit
5 minutes: Get your credit report
Your credit report is a document that shows all the credit or accounts you have and how well you pay your accounts. It includes your credit score, your personal information (your full names, ID number and address), your property information, any judgments or court orders against you, and all enquiries that have been made on your profile. All credit active consumers have one.
You can get a free copy of your own credit report from each of the registered credit bureaus once a year. When you know what your credit report looks like you can apply for credit with confidence. It is also important to know which accounts are negatively affecting your credit score so that you can improve the payment of these accounts. Furthermore, when you request your own report you can see who has been making enquiries on your profile. This will help you spot any fraudulent activity in your name, or potential identity theft.
It takes five minutes or so to request a copy of your own personal credit report #x2013; via phone or online.
Compuscan: 0861 514 131, www.mycreditcheck.co.za; Consumer Profile Bureau: 010 590 9505, www.cpbonline.co.za; Experian: 0861 105 665, www.creditexpert.co.za; TransUnion: 0861 482 482, www.mytransunion.co.za; XDS: 0860 937 000, www.credit4life.co.za
10 min: Make a lump sum payment
Now that you have your report that gives you a holistic view of all your liabilities, you#x2019;ve got the necessary info to decide how to spend your bonus or thirteenth cheque if you#x2019;re lucky enough to get one. If not, try find some wriggle room in the month to increase your payments. Making a larger than usual lump sum payment towards settling a debt means you are not only saving on interest that you would have paid, but also freeing up cash in the long run (in the form of an instalment that you would have paid). This you can now put to good use in the new year – either to settle other debt or to pay for school clothes and other necessities. It also makes you feel lighter and more in control.
15 min: Switch to email statements
Log onto online banking or call your bank and ask to change from paper credit card statements to email ones. Then call your store card provider and ask if they send email statements too. Firstly, many banks will give you a small incentive or discount on your fees for doing so. Secondly, this strategy means you won#x2019;t miss these important statements when they come each month. No more undelivered posted statements, just regular reliable email ones. This will help you better understand your own financial standing each month, and possibly prevent overspending.
30 minutes: Switch to debit orders
Switching to debit orders to service your debt has a couple of benefits. Debit orders are automatic, so you don#x2019;t have to remember to make your repayments, and won#x2019;t run the risk of missing them and having penalties or extra interest accumulating on the outstanding amount. Usually debit orders associated with credit can be set to pay at least the minimum payment due or a larger amount, so that way you know you won#x2019;t fall behind on what you owe.
Remember: chronic underpayment can negatively affect your credit score, just like non-payment. On the flipside, being a regular payer can boost your score. Plus, with a debit order in place, you can relax on your holidays, knowing your repayments will happen, as long as you keep enough of a positive balance in your bank account to service your debit orders. Some banks can even alert you if it looks like you don#x2019;t have enough cash there, giving you time to sort it out.
In your lunch break: Rethink all your accounts, consolidate if possible
This one you can do one-handed but might take a little thought#x2026; Grab a pen and paper, and between bites of your sarmie, write down a list of all your credit accounts, including loans, cards, store cards and anything else. If you know the outstanding balance on each, write that next to each item. Then give some serious thought to which ones you really need and which ones you could do without.
An example: If you still have a store card with a baby goods shop, but your kids are in primary school, perhaps you might consider paying it off with a credit card, closing the account (no more service and monthly fees), and then working diligently on reducing your credit card balance. If you are paying high fees for an expensive credit card #x201C;with benefits#x201D; but find you don#x2019;t use the extras you are paying for, you could save a couple of hundred rand a year in fees just by swapping to a more basic card with your same bank.
Bonus move: Now that you#x2019;re a credit superhero, rope in the extended family #x2013; teenagers, partners, live-in parents or grandparents. Spend an afternoon together, plotting a budget for everyone in the household. Make it fun for younger members by rewarding clever savings ideas with a sweetie or other recognition. Two hours well spent. Plus, you will be giving your kids a real gift #x2013; a sound financial footing for their own lives.
IOL. Adapted from a press release.
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