How To Improve Your Credit Score

November 28, 2007

If you apply for mortgage finance, you do not know if you will get approved for the loan and what the percentage rate will be. Both of these depend on your credit score.

The better you credit score is, the higher your chances of an approval at a low rate.

Credit scores are based on the information in an individual’s credit report. Lenders use credit scores to evaluate the potential risk posed by lending money to consumers

A credit score is a number that reflects your credit risk level. The higher this number, the better, since a high number is an indication of lower risk.

Are all credit scores the same?

There is no single credit score. There are many different scores used in the financial industry for building a credit profile. Lenders will take different factors into account when building a credit score, depending on their own credit granting policies.

Often lenders will make use of data from credit reporting agencies (bureaus) or their own internal data to come up with their unique credit score model.

The two major credit reporting agencies in SA are Experian and TransUnion ITC and they have different information on their credit reports about you.

That means that you will have two credit reports and two credit scores.

Improve your credit score today

A lot of credit seekers do not know how a credit score is calculated. Here is a few tips that you can use to improve your credit score:

Have any incorrect information on your credit cards removed: If something is wrong you should get it sorted out because it can take a few months to get a correction.

Debt ratio: Lenders prefer a large gap between the debt you owe and your credit limit. This is known as your debt ratio and can make up to 30% of your credit file. For example, if you have credit limit of R10,000 on your credit card and you owe R9,900, this represents a very large debt ratio and could have a negative affect on your credit score. By paying off credit card balances that are close to their limit you can improve your rating.

Number and severity of late payments: Payment history is considered by lenders as the most important variable. Your payment history makes up to 35% of your score. Even though you can pay off your debt, it will reflect negatively on your credit rating if you do not always pay your debt on time. If you want a high score then you should make your payments on time.

Types of debt used (installment, revolving or credit card debt): The type of debt you have, will be responsible for 10% of your total credit score. If your revolving credit makes up the most of your credit report it will not look good on your report. The reason for this is that creditors know that the monthly minimums will vary every month depending on how much you choose to spend.

Make arrangements: If you are unable to make a payment due to unforeseen circumstances, talk to your creditor and make arrangements for paying back what you owe.

Limit credit enquiries: Avoid any unnecessary inquiries into your credit, since this is responsible for 10% of your credit report. Do not go shopping for a car and have each and every salesperson in town running a credit check report on you. Be responsible when applying for credit since this stays on your file for two years. If you seeking credit then you should limit credit checks as much as possible

Length of credit history: This will make up 15% of your credit score. If you have a history of credit, you make it easier for lenders to establish how reliable your score is.

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za

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Bad debt can really harm your credit history

November 22, 2007

While most people use the phrase “bad debt” to refer to a lot of debt, or just owing a lot of money, this phrase actually has a very specific use when it comes to financial issues. Bad debt in this case is a debt that cannot be collected. This usually happens when the person who owes the money goes bankrupt, and does not have the ability to pay toward the debt.

If you are a creditor and the person who owes you money declares bankruptcy, this bad debt can be a problem. After all, even though a good deal of the remaining estate will be separated out to the many different creditors, you will probably not get all of the money that you are owed. For this reason, most creditors try to work with the debtor in order to make it possible to pay back the debt – that way, they’ll get all of the money back, instead of just a little.

If you owe money and you do not believe that you can pay it, it might sound like a good idea to have that debt declared as a bad debt. However, this is not the case, as declaring bankruptcy can have lasting effects on your financial situation, whereas being in debt and working to pay off your debts can actually be beneficial in the long run.

When you have a bad debt, it makes a big hit on your credit history. This can be a big problem, especially if you need to get a credit card or a loan. In fact, the credit history can effect pretty much anything you do in the financial world, including mortgages, buying a car, and being able to take out a much needed loan. Therefore, you should do whatever you can to make sure that you’ll be able to pay off the debts you have.

To prevent bad debt, you should first minimize the number of debts you incur to begin with. For instance, if you can possibly avoid buying something, then you should wait until after you’ve saved the money for it, instead of buying on credit. If you already have a lot of debt, then you should look at some of the debt solutions, for instance, debt consolidation.

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za


Need help getting out of debt?

November 19, 2007

Nowadays it seems that getting into debt is much easier than getting out of debt. With todays numerous schemes and facilities no one wants to wait until they have saved enough money to buy anything they wish. If you are one such person who find your debt payments increasing and need someway to get out of debt, follow these simple tips about getting out of debt.

To begin with you have to arrange your debts so that which one needs to be paid first. Generally your credit cards can be the one having greater interest rates; hence you have to pay these off first. If you are able to move the debt to a lower cost card, it would be better. When making a priority list mostly your bank loans will be at the bottom as they generally cost you as much, so that you can wait on paying them down.

After making a priority list, you need to create a budget. Making a budget will help you to control your expenses so that you can have adequate money to make monthly payments. The next step is to select a plan for getting out of debts.

Let us discuss some ways for getting out of debts.

A debt consolidation plan can be an ideal solution for getting out of debt. Debt consolidation is simply a refinancing of one’s debt and is considered as an ideal option by financing experts. In this plan all your debts, let it be credit card or other debts, were taken into one single loan and you can pay off it with a monthly amount. Debt consolidation plan also provides you enough time to pay back the loan according to your current financial situation.

Though debt consolidation takes some little time to pay off your debts it is a most recommended way for getting out of debt. By using this method for getting out of debt, you don’t have to be afraid of credit rate, if your current credit rating is in good standing. By using debt consolidation method try to pay all your small debts you owe on credit cards. This helps to lower your monthly bill. You can opt for a debt consolidation home equity loan to do this. With a debt consolidation home discharge the equity you have on your home. Equity is the difference of your property value and the balance amount of your mortgage or loan.

Some other options for getting out of debt are debt negotiation, debt settlement and even bankruptcy. Debt negotiation and debt settlement are actually the same. In this case, the debt help company which you hire will talk or negotiate with your creditors and try to decrease the principal amount you owe them. Generally, debt negotiation and debt settlement options are chosen by people who have huge debt which they are not able to handle. The debt consolidation method is the best option for getting out of debts if you can handle the debts.

Bankruptcy is another option for getting out of debts. This type of settlement will uniformly distribute the assets of bankrupt among the creditors and relieve the bankrupt form any further liability. Bankruptcy is regarded as the last solution one must consider for getting out of debts.

Remember, getting out of debt needs more than just simple willpower. A better planning, budgeting, controlling your expenses, together with willpower will definitely help you for getting out of debts.

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za

 


Good debt vs bad debt

November 14, 2007

Debt has been a part of every body’s life and personal debt gradient is on the rise because credit hasn’t been easier to receive. In everyday life, most of us would not have enough finances in one go when it comes to paying for our apartments or children’s college education. Hence we borrow in one form or the other to get the expenses meet.

Debt is not a simple concept to comprehend, but in fact is a bit difficult one to get hold of. Ideally, as per financial experts’ statements, a person’s total monthly long term debt payments – which includes credit cards and mortgage – should not exceed 36 percent of his/her gross income for a month. This is the bench mark mortgage bankers take in to consideration while appraising the creditworthiness of a potential borrower.

It is very easy to spend far more than what one could afford. It is interesting and intriguing that a large number of people does exactly this and fail to recognize that they are heading down in an abyss – the deeper you sink, the more difficult will be the chances of a recovery. That is unbridled spending. But to avoid debt is not a smart option either. If properly handled, debt can be money spinning as well. That brings us to the concepts of Good Debts and Bad Debts. Let us see what are the differences between good debts and bad debts?

The secret of acting smart with the money is all about learning to discern between good debt and bad debt. Unfortunately this is something that most people around the world fail to be experts in. Good debt is something that helps improve your financial position or net worth. That is, in simpler terms, a good debt increases cash flow. That is, mortgage debt, for example, is good debt. You are borrowing money from someone, but you’re getting a tax advantage so that you are able to cancel interest on an asset that’s gaining in value over time. Also you can live there.

On the other hand bad debt can occur when you buy something that goes down in value immediately. That is, when the thing that has been brought on credit does not have the potential to increase its value. Purchase of disposable goods or durable items or, as commonly found, the use of higher interest credit cards can lead one into bad debts. Ideally, debt-to-income ratio of a person shouldn’t go above 20 percent. That is – while adding up all of your non-mortgage loans, credit cards and outstanding charges – it should not exceed 20% of the annual income. If it goes beyond the 20% mark, that is bad debt and it doesn’t go down well in his/her credit reports even if payments are made in time.

To conclude, debts can be productive if properly and rationally exploited. It is financially draining to incur bad debts but if you could gain more by investing the borrowed money than the interest associated with the credit, then it is good debt which is useful. Managing one’s debt and hence the finances might need a bit of brain scratching. But it is not that enigmatic for a common man to comprehend. After all it is no rocket technology. It is all about learning to manage your finances!

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za

 


Borrowing Facts Your Current Creditors and Most Bankers Hope You Never Find Out

November 14, 2007

1. HOW MUCH EQUITY DO YOU REALLY HAVE IN YOUR HOME?

This is a closely guarded banker’s secret. The truth is, you probably have more equity (value) in your home than you think. And different companies use different methods to determine how much you can borrow on your home. These days, there are even plans that allow “borrowing power” you have locked up in your home.

2. SECOND BONDS ARE A BAD IDEA.

Sometimes a second bond is a bad idea but sometimes it’s a good idea — it just depends on your particular circumstances. Your financial advisor or mortgage broker’s job is to determine THE best way for you to use your home’s value as the “crowbar” to pry open the financial prison doors and get you to the best possible financial place you can be.

3. REFINANCING IS TOO EXPENSIVE.

Refinancing usually has some costs but is NEVER “expensive” when it saves you money. When refinancing slashes your interest rate and/or pays off other high-interest bills and/or lowers your total monthly bills, it is NOT “expensive”.

4. CREDIT PROBLEMS STAND IN MY WAY.

Many people think that a bad credit record stays on their records for seven years. While that is technically true, there are good loan programs where only your most recent 12 months of credit behavior is considered. There are good plans even for people with past or even recent bankruptcies. The debt would have to be paid and you have to be rehabilitated for at least a year.

Also, if you are a self-employed homeowner, you can obtain a home mortgage refinancing plan that is in your best interest, which will save you money, regardless of past or present credit problems. Of course, if you have good credit, so much the better. But you do not need to be trapped because of credit problems either.

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za

 


Bad debt can really harm your credit history

November 11, 2007

While most people use the phrase “bad debt” to refer to a lot of debt, or just owing a lot of money, this phrase actually has a very specific use when it comes to financial issues. Bad debt in this case is a debt that cannot be collected. This usually happens when the person who owes the money goes bankrupt, and does not have the ability to pay toward the debt.

If you are a creditor and the person who owes you money declares bankruptcy, this bad debt can be a problem. After all, even though a good deal of the remaining estate will be separated out to the many different creditors, you will probably not get all of the money that you are owed. For this reason, most creditors try to work with the debtor in order to make it possible to pay back the debt – that way, they’ll get all of the money back, instead of just a little.

If you owe money and you do not believe that you can pay it, it might sound like a good idea to have that debt declared as a bad debt. However, this is not the case, as declaring bankruptcy can have lasting effects on your financial situation, whereas being in debt and working to pay off your debts can actually be beneficial in the long run.

When you have a bad debt, it makes a big hit on your credit history. This can be a big problem, especially if you need to get a credit card or a loan. In fact, the credit history can effect pretty much anything you do in the financial world, including mortgages, buying a car, and being able to take out a much needed loan. Therefore, you should do whatever you can to make sure that you’ll be able to pay off the debts you have.

To prevent bad debt, you should first minimize the number of debts you incur to begin with. For instance, if you can possibly avoid buying something, then you should wait until after you’ve saved the money for it, instead of buying on credit. If you already have a lot of debt, then you should look at some of the debt solutions, for instance, debt consolidation.

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za


Types of Properties

November 5, 2007

Freehold / Full Title Properties
Full title describes the transfer of full ownership rights to the buyer. This means that you own the properties as well as the land it is build on. Examples of full title properties are vacant stands, houses, farms, plots, smallholdings etc.

House
This word describes a normal house with an ERF number.

Cluster House
Cluster houses are houses are a group of houses which usually has limited access and good security. Each house is individually owned and there is no levy to be paid, unlike sectional title.

Smallholding
A property is classified as a smallholding if it is situated in or within a 150 km radius of a built up area, does not exceed 20 hectares and is able to be connected to a local authority water supply or has a borehole.There must be a home on the property and the main source of income must not be from farming on the property. If the smallholding is larger than 8,56 hectares, you will be charged an interest rate of 1.5% above the qualifying home loan rate.

Residential property used for business purposes The property will be regarded as residential property provided that no structural changes are made which may affect its description as a domestic residential property. An interest rate of up to 1.5% above the qualifying home loan rate is applicable if more than half of the house is used for business purposes.

Sectional Title Properties
Sectional Title living is governed by the Sectional Title Act 95 of 1986.When you buy a sectional title townhouse/flat you will have sole ownership of the townhouse/flat, together with joint ownership of the common property. You acquire a section which extends to the mid-point of the outer walls, the lower part of the ceiling and the upper part of the floor. This means that anything outside these borders either belongs to another owner or is common property.

Common property
There is common property in sectional title living such as stairways and lifts, swimming pools, club houses, entrance foyer and outer walls etc. that are there for the use of all the residents. The common property is that part of the complex which does not form part of any section.

Alterations, repairs and maintenance
Permission must be granted by the Body Corporate for any alterations to any part of the common property.

The Body Corporate are responsible for the upkeep of the common property.

However, the maintenance and repair of the hot water system is the responsibility of the owner who the system serves no matter where it is located. If the system serves more than one sections such as is the case with a boiler in some of the older complexes, the repair and maintenance is the responsibility of the Body Corporate.

Exclusive use area
Exclusive use areas are portions of the common property which you do not own, but over which you alone have use. This could include: parking bays, garden, patio, garages and storeroom

The Body Corporate
From the date of the first sale of a sectional title unit, a Body Corporate is instituted for the particular complex. The developer (until all units have been sold) and the other owners become members of the body corporate. As a registered owner you are automatically a member of the body corporate. This means you will be liable for the debt of the Body Corporate, so it is advisable that you study the financial statements of the Body Corporate before you buy such a property.

Trusteeship
Trustees are selected during the first meeting of the Body Corporate. Trustees may not derive any economic benefits from the Body Corporate, because they are trustees of the Body Corporate.

Their responsibilities include the daily running of the complex such as sending out levy accounts, maintenance etc.

Levies
These are normally monthly fees which each owner must pay to the Body Corporate to cover costs incurred. These levies will cover costs such as repairs & maintenance, rates and taxes, insurance premiums, garden services etc. In addition a special levy may be charged in instances where there is a shortfall in funds to improve certain structures.

Full title stands in a security village
If you buy a full title stand in a security village, you will be subject to certain rules and regulations regarding common property. For example: the entrance gates, boundary walls, etc. For the maintenance of these common areas a Section 21 Company (Home Owners Association) is normally incorporated. Each owner automatically becomes a member of the Section 21 Company on the date of transfer and a monthly levy is normally payable by the owners to the Home Owners Association.

If a sectional title complex is situated within a security village, it forms part of it – the development conditions of the Estate normally stipulate that all owners must become members of the Home Owners Association (HOA). The Body Corporate would therefore have to pay the levies that are determined for such an HOA and this amount will have to be included in the monthly levy that each sectional title owner has to pay to the Body Corporate.

Townhouse or flat
Townhouses are properties that are located within a complex. A townhouse of flat unit must be in an approved sectional title complex. The townhouse property can either be a semi consisting of one floor or a duplex which has two floors. The complex must only contain residential units.

Semi detached house
This describes two houses that are attached to one another. They may be on separate stands and bonded individually as ordinary houses. They can also be on one stand and bonded together under one bond. The other alternative is that they are sold as separate units in a sectional title development.

Duet House
This is similar to a semi-detached house, but there are two separate free-standing units on one stand. It could also be two dwelling units attached to one another on one stand. They can be sold under sectional title

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za