Financial Advice for Zululanders

Three signs you might have
a credit card problem

Credit cards are an important part of our lives, as it is a lot safer than handling cash. But because it is so easy to swipe plastic, credit cards can easily get you into financial trouble. Here are three signs that your credit card use might be a problem:

1. YOU REGULARLY MISS YOUR PAYMENTS
We all have difficult months, but if you’re often unable to pay your instalment at all, or if you can’t pay more than the minimum each month, your debt will grow and your credit score might suffer.
2. YOU USE YOUR CREDIT CARD IMPULSIVELY
It’s nice to treat yourself to an occasional luxury, but if you can’t stick to a budget or find yourself unable to control impulsive buying habits, your credit card may quickly become a financial liability.
3. YOU HAVE A LOT OF CREDIT CARDS
Not everyone knows it, but sometimes having an unusually high number of credit cards can hurt your credit score. Transferring your balance to a card with a lower rate can be a good idea, but if you’re simply extending your line of credit with each new card, it may become a problem.

Credit cards are convenient and can make our lives easier. If you don’t pay attention to all of the fees and interest rates that you have committed to, however, debt can become a burden you will spend years trying to remedy.

What is good credit, anyway?

Your credit score can make or break you. It will determine whether or not you qualify for a mortgage, motor vehicle financing or any type of credit or loan.

Your Credit Bureau score is calculated using a formula that evaluates how well or badly you pay your bills, how much debt you carry and how all of that stacks up against other borrowers. In effect, it tells you in a single number what your credit report says about your management of existing credit.

The higher your score, the better.

Secrets to improve your credit score

Account Payments

  • Pay your accounts on time.
    Late payments and short payments can have a major negative impact on your score.
  • Get current and stay current. 
    The longer you pay your bills on time, the better your credit score.
  • If you are having trouble making ends meet, contact your creditors 
    This won’t improve your credit score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

Amounts Owed Tips

  • Pay off debt rather than moving it around. High outstanding debt can affect a credit score.
    The most effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
  • Don’t close unused credit cards as a short-term strategy to raise your score.
  • Don’t open a number of new credit cards that you don’t need, just to increase your available credit.

Length of Credit History Tips

  • If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly.
    New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit Tips

  • Do your rate shopping for a given loan within a focused period of time.
    Credit scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which enquiries occur.
  • Re-establish your credit history if you have had problems.
    Opening new accounts responsibly and paying them off on time will raise your credit score in the long term. Request and check your own credit report.
    This won’t affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.
  • Have credit cards – but manage them responsibly.
    In general, having credit cards and installment loans (and paying timely payments) will raise your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
  • Note that closing an account doesn’t make it go away.
    A closed account will still show up on your credit report, and may be considered by the score.

How to protect your
investment in your car

Like your house or your coin collection, your car is an investment because it can be sold for a lot of money should you ever need it. That being said, unless it’s a classic car that is in high demand, used cars will virtually always sell for less than new ones. Here are three easy ways to protect your car from excessive value loss:
1. DO YOUR RESEARCH
Protecting your investment starts before you’ve even made a purchase. Not all cars are the same. Determine what you’ll need from your vehicle and which vehicles are made for that job before going to a dealership. Do you live in the country or the city? Will you be taking your car on long family trips or just occasionally going to the grocery store? These different needs will require different vehicles.
2. BUY A CAR FOR SUBSTANCE, NOT STYLE
Many people love cars and want to buy the one that looks the best and newest. This isn’t always the best idea investment-wise, however. Knowing that your vehicle will withstand harsh Canadian winters is more financially important.
3. REGULAR MAINTENANCE IS YOUR BEST OPTION
Once you’ve made your purchase, treat your car like an investment. Don’t wait for something to go wrong; get your car regularly checked by a professional. From a financial point of view, what’s important when choosing and maintaining a car is picking the one that’s right for you rather than the one your neighbours will envy.

Which kind of financial adviser
is right for you?

You enlist the help of a professional when you need a legal expert or doctor, and you should do the same when it comes to financial planning.

It is complicated to do your own life expectancy, replacement ratios and inflation calculation, and you might not be aware of all the regulations or products on offer, which is why the help of a professional can be invaluable.

A good financial adviser will conduct a comprehensive overview of your financial needs and assist in structuring a portfolio of investment and risk products that matches your income and life stage.

A financial adviser can offer valuable guidance when critical financial decisions must be taken and often dissuades clients from making ill-thought-out decisions with costly consequences.

Take the time to find a financial adviser that you can trust; this will increase the odds of it becoming a long-term relationship.

The industry is regulated and financial advisers, and the firms they work for, need to be registered members of the Financial Services Board (FSB). Many financial advisers are also members of the industry’s trade association, the Financial Intermediaries Association of South Africa (FIA).

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