Why is your credit rating so important?
With 65% of South Africans living beyond their means and the number of defaults increasing, it can be expected that the two biggest credit bureaus in South Africa will be issuing far more negative than positive credit reports this year.
In SA, a person's credit score is worked out by taking into account these five main categories of information: payment history (35% of the overall score), amounts owed (30%), length of credit history (15%), new credit (10%) and type of credit used (10%). Companies then use your credit score to see how "risky" of an investment you are.
Managing your debts
It's simple. The more payments you miss, the worse your credit score. Until your poor credit rating has been improved, you will unlikely qualify for more credit and, if you do, you will then struggle to get the credit at a low interest rate.
If you're in trouble, look into a do-it-yourself debt reduction plan before looking for help from debt counsellors. It's an easy and practical route, which is too often disregarded.
How it works is you look at how much you owe, what interest rates you're charged and the monthly amount due for each debt. With this in mind check your budget and subtract your monthly expenses from your income. Include main expenses such as rent or bond repayments, as well as other expenses, for example, entertainment. The amount of money you are left with will form part of your debt repayment budget.
Then decide, are you:
- spending more than you earn;
- spending exactly what you earn; or least likely
- spending less than you earn.
From here you develop an action plan. Decide which debts you must repay first and which expenses you can do without. Try and pay the debt with the highest interest rates first, for example, micro-loans.
If all else fails, debt counsellors are a good option because someone else will decide how much you repay your creditors every month, leaving you with enough to live on. Also ask about a quick or accelerated repayment plan so you can repay your debts faster.
Whatever you do, it's always a good idea to take charge of your financial situation to turn your poor credit ratings into a positive credit report.
To help you save even more during these times, check out Justmoney.co.za's savings tips and try the following:
Check what you pay for your insurance and assurance products
Shop around again if you haven't done so lately, get competitive quotes and fight for a better rate - you may be able to reduce your premiums.
Manage your short-term debt
The interest on credit cards, store cards, overdraft facilities and personal loans is usually higher, so the cost to service this debt is more expensive. So pay this off before you pay off anything else. Also make sure you budget for the minimum monthly payment due.
Do you need comprehensive medical aid cover?
Evaluate your medical aid. Are you being over cautious? Perhaps you can downscale to a more basic cover.
Budget for bank charges
Bank charges can also add up. You'd be off to a good start by banking with GoBanking but you can save even more by drawing money at Pick n Pay. Make sure you budget for these charges and that you don't go over your overdraft limit to keep your bank costs at a minimum.
Cut back on luxuries
One less packet of cigarettes, four less cappuccinos and one less meal out could save you about R230 which could be used to pay one of your must have expenses, such as your bond insurance. If you need a financial break, have your DSTV decoder switched off for a few months. Or cancel that internet account you are not using.
Pay off your long-term debt as quickly as possible
Make your home loan payment your first payment of the month. For example, If you get paid on the 20th of the month, pay this into your bond as soon as possible. The longer you wait, the more interest you pay. Also pay in any extra cash you might have into your bond. You'll be surprised at the difference it makes. It will ultimately bring down your monthly instalment and release disposable income.
If you're battling, let your bank know
Call them to try to make payment arrangements if you're still struggling. ...
And to help save our environment - and possibly save money into the bargain - GoBanking suggests you try the following:
Be a bright spark
Swap your normal old-fashioned light bulbs with compact florescent light bulbs (CFLs). They last up to 10 times longer and use 66% less energy!
Choose energy-efficient appliances
These can lower your electricity bills, save you money over time and reduce the green house gas emissions.
Look after your old appliances
Reduce the work load of your appliances. For example, your fridge should not be next to a heat source. This forces your fridge to work overtime and results in energy wastage.
Your TV, Hi-Fi, computer and other electronic equipment that are left on in standby draw energy and collectively can make up 15% of your electricity costs. Switch them off at the plug.
Tuck in your geyser
Insulate your geyser with a geyser blanket. Turn it down to about 55ºC. Install a geyser timer switch that activates your geyser at certain times of the day.
Installing insulation in the ceilings is the best solution - it will keep you cool in summer and warm in winter.
A well-serviced and tuned car with the right tyre pressure uses less petrol which lowers CO2 emissions and saves you money at the pump.
Installing low flow shower heads and taps will use much less water and lower the amount of hot water you use, which will lower the energy used by your geyser.
Hug a tree (or at least plant one)
Trees are the planet's lungs and through photosynthesis convert harmful CO2 (carbon monoxide) to oxygen. Plant or sponsor a tree or ten with City Parks.