Moving forward with finance and credit scores

“When your outgoings exceed your income, your upkeep becomes your downfall”
- Bill Earle

Infinance promotes responsible lending. The last thing we want to see is people who can’t move forward in life because they’re straddled with debt and it’s just holding them back. A low credit score created by too many enquiries on their credit report or worse, credit defaults which are a sign of over-commitment that remain on your credit file for five years will destroy any hope of moving forward. 

So … if you want to get finance for something worthwhile, do this

• Live within your means - make sure there’s more money at the end of the month they month at the end of the money

• Save 10% of what you earn – compound interest is powerful

• Create an emergency fund, build up to  3 – 6 months of living expenses

• Save a deposit, finance companies like to see a bit of own commitment
  

Credit scores

• NZ Credit reporting agencies of Illion, Equifax and Centrix create scores out of 1,000 and vary slightly but in general, an excellent score is in the 800’s or more, very good 700’s, average 600’s, fair 500’s and poor under 500.

• Some finance companies won’t even look at an application where the primary applicant has a score under 500 and for others, it’s under 400 or 300.
  

How to improve your credit score

• Pay all your bills on or ahead of time – as credit agencies report late and non-payments that reduce your credit score, now there is positive reporting that also records early payments and increases your credit score.

• Buy Now, Pay Later … uh uh … save now and buy later, every BNPL decreases your credit score, they’re bad for it.

• Credit enquiries – every time you apply for credit it’s recorded on your credit report and stays for 5 years so don’t do it unless you’re absolutely going to take it … shopping for finance is a bad idea, less is best on your credit report.

• You need some credit history, however. No credit enquiries also raises red flags, who are they, where are they from, how long have they been here, what have they been doing … that sort of thing.

• So … take out a small manageable loan for something worthwhile and pay it off early, then maybe something larger, then larger again so finance companies can see you can handle a commitment, but keep it minimal and easily manageable.

• Avoid low-grade / second-tier high-interest finance companies, you don’t want them appearing on your credit report.

• Do obtain quality loans from banks and first-tier finance companies, again not too many, just enough to make you look good and be easily manageable.
  

Credit cards and store cards

• One is handy to have and good for your credit score but keep the limit low and pay it in full each month.

• When applying for finance, the limit on each card you have is factored as if you had it fully whacked and have to pay the minimum balance on each one even if it has a $0.00 balance so … 3 cards with a $10,000 limit will attract an expense factor at 3% of $30,000 being $900 mth, even if you had nothing on them … ahhh but you could you see … that’s how it works.

• Banks and finance companies can tell what credit you have available and on what cards so even if you lost and never used a card or its expired, the facility is still there and can be re-activated and used, so if it’s not closed, it’s counted.

• You can use Visa debit cards for most things these days but a credit card with a small limit is okay, better still, keep it in credit balance, makes you look good.
  

“Beware of little expenses, a small leak will sink a great ship.”
– Benjamin Franklin 

Call me if you would like any clarification on setting up a strong finance application.