It’s that time of year again when we all rush for the vacuum and duster to spring clean ahead of summer. But your home can wait. This year the first task on your to-do list should be to conduct a financial spring clean.
Not only because of interest rate and fee changes - which means you may no longer be on the best deal - , but also because comprehensive credit reporting (CCR), is now happening. The new credit reporting changes will provide a fuller, clearer picture of your credit history. These changes may make it easier – or for some people, harder – to get credit or a loan.
So, if your finances are showing any of these warning signs, it may be time to take action and commit to a spring fix.
You can’t remember the last time you paid with points
Whether you’re no longer getting the rewards you once did for your spend, or you’re paying more interest than you need to be, reviewing your credit card on a regular basis is a great idea because it just might not be the right card for you anymore.
The fix
The simplest solution is to switch to a card that really matches your needs. That could be one with a better value rewards program that actually helps you accumulate points, or a low rate card that won’t hit you with as much interest if you tend to carry a balance. Just remember that while it may be tempting to apply for a bunch of offers at once this could have a negative impact on your credit report, so be smart with your applications by doing your research and narrowing your field to just a few credit cards and then only apply for one!
You don’t know how large your personal loan repayments are
Hand on heart, do you remember how much you’re making every month in personal loan repayments? Chances are you might if it’s a fixed loan, but if it’s a variable rate loan you may just find that your repayments are proving a bigger drain on your bank balance than they used to if your rate has been hiked up. If that’s the case, then it could be time to look at your options.
The fix
Your first step should be to contact your lender to see if you can haggle your rate back down to what it was. If that fails, it may be worth comparing other offers and refinancing to a better deal. Just make sure you weigh up any fees involved before making the switch, because it may not make sense to pay a hefty application fee if you’ve only got a short amount of time left on your loan.
You can’t name your home loan rate off the top of your head
Home loan interest rates have well and truly been on the rise so now’s the time to make sure that you’re still getting the same rate you were, because if your lender has increased rates it could be worthwhile thinking about reassessing your deal. And if you think the monthly fees on your home loan are hitting harder than they need to be, it could also be time to weigh up the benefits of your offset account or the other features you’re being charged a premium for.
The fix
In this case a basic home loan deal which, while not having features like an offset account, could prove to be the better value option when it comes to fees. But what about snagging a lower interest rate? While many lenders have been hiking rates there’s still plenty of opportunity to grab a better value deal if you’re willing to do your research and make the switch to a home loan with a lower interest rate.
What does this mean for your credit health?
From the end of this month, the big four banks will be sharing comprehensive credit reporting data, which means lenders will have a clearer picture of consumer’s credit health when they next apply for credit.
Having a loan that is too big, missing a payment, or having too much credit, may impact your ability to make your re-payments on time, ultimately hurting your credit report. The good news is that if you have been paying off your credit card and loans on time, this will count towards your credit worthiness - as you have been demonstrating your ability to responsibly manage debts.
Lenders can check if the credit you applied for is right for you. Better still, they may offer a loan with an interest rate and repayment schedule that is tailored to your unique circumstances.