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Planning ahead this festive season can save an unwanted default on your file.
Blogger: Richard Symes, CEO, Credit Repair Australia
With Christmas only weeks away, we are all planning the rituals that go along with the season. For many, this includes spending well beyond their means with a 'buy now, think later' attitude. Analysis from Veda, Australia’s largest credit reporting agency, has revealed that consumers who made credit card applications between October to December were 20 per cent more likely to default on repayments within six to nine months.
This trend is concerning, as the same analysis also found that credit cards are accounting for an increasing share of first consumer credit defaults, up three per cent last year – which equates to tens of thousands of defaults.
People relying on credit to fund their Christmas activities generally have a higher chance of ending up in financial strife compared to those that don’t. If you rely on credit this Christmas, we recommend planning how much you can afford and sticking to it, as this can often save a lot of stress towards the back end of January.
While credit cards will be a major cause of financial pressure post-Christmas, personal loans are also an increasing avenue for financial stress among many Australians. The data from Veda found that personal loans as the first default type accounted for 10 per cent of all first default types last year, a rise of one per cent. The rate at which credit cards and personal loans are increasing in relation to the first default type is a concerning statistic.
Financial stress directly related to credit cards in December and January can have a flow-on effect to your other financial commitments, such as home loans. To ensure your credit cards don’t hinder your ability to purchase a new, or repay an existing, investment property, we have put together four great tips to help you avoid a credit crisis in 2015.
1. Make a budget – Planning ahead can save you from a post-Christmas spending hangover. You shouldn’t forget to include the ongoing monthly expenses along with the additional expenses that Christmas entails.
2. Spend within your means – Once your budget is complete and you know how much you can afford, it's important to stick to it. This will save you from overspending on unnecessary items.
3. Save, Save, Save – It’s not too late to start saving for Christmas. Cutting down now on all non-essential items can help you be less reliant on credit this Christmas.
4. Check your credit report – Ideally, you should check your credit report annually. If you haven’t done so before, checking it after Christmas will put you in a good position to plan your 2015 financial goals.