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9 Strategies for Improving Your Credit Rating

In his book Dirty Little Secrets, bestselling author and personal finance expert Jason R. Rich reveals the secrets of credit reports and ratings and explains what you can do to improve both.

Jason R. Rich

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Some of these strategies may seem like common sense; however, they represent solutions to the most common reasons why the typical person develops a less than perfect credit rating.

1. Pay your bills on time, every time. This strategy may seem extremely obvious. However, late payments are the most common piece of negative information that appears on people’s credit reports and is often responsible for significant drops in their credit scores. When it comes to loans and credit cards, it’s vital that you always make at least the minimum payments in a timely manner, each and every month, with no exceptions.

2. Keep your credit card balances low. One factor that’s considered in the calculation of your credit scores is your credit card balances. Having a balance that represents 35% or more of your overall available credit limit on each card will actually hurt you, even if you make all of your payments on time and consistently pay more than the minimum due. Make timely monthly payments on the balance that are above the required monthly minimums.

If you have an average or better credit rating, consider asking your credit card issuers to increase your credit limits. However, do not utilise this extra credit by making more purchases. By increasing the amount of credit that’s available on your credit cards while working to reduce your debt, you will improve your credit utilisation and help to increase your credit scores.

3. Don’t close unused accounts. One of the factors considered when calculating your credit scores is the length of time you’ve had credit established with each creditor. You’re rewarded for having a positive, long-term history with each creditor, even if the account is inactive or not used.

So avoid closing older and unused accounts. Instead, simply put those credit cards in a safe place and forget about them. Although you don’t want to have too many open accounts, having five or six credit card accounts open, even though you only actually use two or three cards, can be beneficial.

4. Only apply for credit when needed, then shop for the best rates. Applying for a retail store card you’re going to use once or twice, when you could just as easily use an existing credit card, might not be the best idea. Over the long term, if you maintain a balance on a store credit card, for example, the fees and interest charges are often much higher than a major credit card.

5. Correct inaccuracies on your credit reports, and make sure old information is removed. One of the fastest and easiest ways to quickly give your credit scores a boost is to carefully review all three of your credit reports and correct any erroneous or outdated information that’s listed. If you spot incorrect information, you can initiate a dispute and potentially have it corrected or removed within 30 days.

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6. Avoid too many hard inquiries. Every time you apply for a credit card or loan, a potential creditor/lender will make an inquiry with one or more of the credit reporting agencies (Experian, Equifax, or TransUnion).

This inquiry information gets added to your credit report(s) and will typically remain listed for two years. If you have multiple inquiries in a short period of time, whether or not you get approved for the loan or credit you apply for, this can dramatically reduce your credit scores.

7. Avoid bankruptcy, if possible. In terms of your credit reports, credit rating, and credit scores, filing for bankruptcy is one of the absolute worst things you can do. If your credit scores haven’t already plummeted as a result of late payments, missed payments, charge-offs, and defaults, when the bankruptcy is listed on your credit reports, you’ll notice a large and immediate drop in your credit scores.

Furthermore, that bankruptcy will continue to plague your credit reports for up to ten years and could keep you from getting approved for any type of loan or credit during that period.

8. Avoid consolidating balances onto one credit card. Unless you can save a fortune in interest charges and fees by consolidating balances onto one credit card, this strategy should be avoided. One reason is that maxing out any of your credit cards will detract from your credit scores, even if you make on-time payments.

Assuming the interest rate calculations make sense, you’re better off distributing your debt over several low-interest credit cards. An alternative is to pay off high-interest credit card balances using another type of debt consolidation loan or by refinancing your mortgage with a cash-out option.

9. Negotiate with your creditors or collection agencies. Contrary to popular belief, your creditors and lenders aren’t your enemies. Your creditors are in business, and the nature of business dictates that they strive to earn a profit.

When you don’t pay your bills, this impacts a creditor’s ability to do business and impacts its bottom line. Many creditors are willing to be understanding of difficult financial situations, especially if you openly communicate with them in a timely manner.

In other words, instead of skipping a handful of payments or defaulting on a loan, contact your creditors and lenders as soon as a problem arises and negotiate some form of resolution that’s within your financial means. Depending on the level of your financial difficulties, your creditors may be willing to assist you.

Personal Finance

(Infographic) The Financial Advice Millennials And Gen Zers Want To Know

Having a grasp on your financials is tricky, but it’s crucial if you want to be successful. And that starts with getting the right advice.

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Whether it’s saving for retirement or paying off credit card debt, money management can be a challenge. Of course, different people have different concerns – and that often comes with age. While a 60-something baby boomer might be organising their savings for retirement, your 20-something millennial might be focused on paying off student loans.

In a recent study, financial intelligence company Comet surveyed more than 1 000 people to uncover the top financial concerns of various age groups, as well as the financial advice millennials and Gen Zers want to know and what they hear instead.

Overall, saving for retirement was the top concern across all age groups, with saving for an emergency and affording monthly bills following in second and third. However, it’s no wonder these are some of the most pressing worries – according to the research, 23 percent of people admit they don’t have a savings account, and 43 percent reported not being on track towards their retirement goals. Perhaps that’s because they didn’t hear the right advice growing up. At least that might be the case for Gen Zers and millennials.

According to the research, these young people want to learn things such as how the stock market works, how to manage an investment portfolio, how to invest in real estate and how to build credit. Instead, they’re simply told how to create a budget, save for retirement and pay credit card bills in full every month.

Related: 7 Critical Things Your Financial Advisor Must Meet

Having a grasp on your financials is tricky, but it’s crucial if you want to be successful and comfortable. To learn more, check out Comet’s infographic below.

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Related: Financial Wellness Coach Nelisiwe Masango Shares Retirement Wealth Advice

This article was originally posted here on Entrepreneur.com.

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Personal Finance

14 Ways To Make Quick Cash On The Side

If you need money quickly, here are some solid ideas.

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Need to make some fast money on the side, whether it’s to pay off a credit card or to make your rent?

Keep in mind, making quick side cash isn’t about making a lot of money or getting rich. It’s about getting a shot of capital to help tide you over and put something extra in your pocket. However, some of these side-income ideas can build up your wealth over time. There’s many ways to accomplish this: By participating in the gig economy, the sharing economy, online sales networks, passive income techniques and more.

If you’re looking to make extra money in a relatively short period of time, check out these 14 slides.

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Personal Finance

Take Advantage Of Financial Democracy Made Possible By The New Stock Exchanges

Why should financial democracy matter to entrepreneurs?

Etienne Nel

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Because it creates a society able to afford products and services. Without it, even the innovative products and services that are entrepreneurs’ bread and butter will fail.

What is financial democracy, exactly?

It’s both the right and the ability of the (wo)man in the street and business people to make the decisions that affect their financial circumstances.

Financial democracy does not automatically follow political democracy. For almost 25 years after South Africa’s political transformation, the exclusiveness of our financial markets continued to deprive the vast majority of South Africans of the means to invest, save, and build wealth. South Africa has, therefore, never developed a retail stock exchange environment. So, it has deprived the majority of small and medium sized business of access to capital.

For entrepreneurs to truly flourish, they need a mechanism that easily and seamlessly connects the investor pool with every size of business. And, they need affordable ways to enter both the retail and institutional market.

In short, they need stock exchanges. Ones on which listing takes weeks rather than years, doesn’t break the bank for listing fees, and provides the shortest route to the largest possible potential investor base.

That’s not been possible in the stock exchange monopoly that existed for six decades. Now, it is.

What’s changed?

We now have four new stock exchanges. The resulting competitive environment will significantly reduce the cost of listing – and the cost for investors of buying and selling shares.

Instead of restricting share trading to people or organisations who already have tens of thousands of rands to invest or millions to spend on listing, by licensing four new stock exchanges, the Financial Services Conduct Authority (FSCA, formerly the FSB) has recognised that most financial decisions do not call for high levels of education.

Related: The Role Of Foreign Exchange In The Economy

Most people know how to spend their own grocery money. Most know that it’s better to keep their R1 000 monthly income in a coffee jar than spend R50 of it on bank account fees. People who can barely read and write are immensely skillful at manipulating air time deals to their advantage.

There is significant financial savvy in all social strata.

In the same way, although the mechanics of bookkeeping and accounting may be unfamiliar territory to many entrepreneurs, most have a clear understanding of the difference between profit and loss.

The FSCA has therefore enabled democratisation of the financial markets by enabling the broadest possible spectrum of entrepreneurs and investors to use stock exchanges to participate in and contribute to the economy – on their own rather than prescriptive terms.

How do you take strategic advantage of this democratisation?

  1. Base your business strategy on people’s instinct for making decisions in their own best interests. Trust financial decentralisation, such as one sees in crowd funding and in digital environments such as block chain, where people would far rather trust one another than institutions and governments. This is democracy innately at work in the financial environment and it’s accelerating organically as digital technologies give people more means and the confidence to help themselves – to information and opportunities. Ride the wave.
  2. Tap into people’s desire to innovate. Consumer organisations have proved that letting people interactively help them develop products is a powerful growth engine. Apply the principle by letting people grow your business by buying shares in it, giving you capital and themselves a platform on which to build wealth.
  3. Remember, the ultimate loyalty reward is equity.

Your financial democracy business plan

Look to list on an entrepreneurial stock exchange; one that was founded by entrepreneurs on entrepreneurial principles.

That means: A stock exchange that is already built on financial democracy and decentralisation. One that has, at its core, a single operational concept that keeps things simple for you, automatically gives you an immediate competitive advantage, and, ensures that no matter what your business needs in terms of attracting capital, the exchange can provide all the options in the same, consistent way.

What does such an exchange look like?

It has fintech capabilities. So:

It slashes your listing costs. It achieves this, among other things, by enabling you to populate an electronic prospectus, demonstrating your financial viability, and self publish.

It gives you control by having the granularity and agility to impose relevant governance right down to the individual investor. You get to decide the types and quantities of investors you want to attract. This also enables you to achieve black economic empowerment in perpetuity.

It leads the world by clearing and settling trades in T+0. No-one in the value chain has to hold large sums of money for days following a transaction. Small transactions become profitable. Investors don’t have to risk their life savings on a single large trade. A retail market is opened. An investment and savings culture is entrenched. The economy expands. Your business grows steadily.

It enables anywhere, any time trading via a mobile app that allows investors to see share value in real time. See economy expansion point above.

It integrates processes and procedures, simplifying them and ensuring rapid onboarding of issuers and, therefore, speed to market with new concepts and alignment with the digital economy.

It operates a principles-based regime. So:

It treats you, as an executive, with respect. It’s not prescriptive. It does not insist on excessive oversight, allowing the Companies Act to guide you to sustainability.

It does not attempt to squeeze your company into a pre-defined business or listings format. It recognises and works with your uniqueness.

It obviates the need for expensive specialist listings advisors.

It focuses on financial inclusion and access. So:

Shares can be bought and sold for no more than R1 000. See economy building point above.

Related: 27 Of The Richest People In South Africa

The new world of stock exchanges is integrated, synergistic, holistic, organic, self-fulfilling

Decentralisation of financial control, democratisation of opportunity leads to a whole new economy. One in which, for instance, a taxi operator can finance a minibus through a company in which his purchase gives him shares. A single purchase gives him two benefits: a vehicle on which to found his business and a longer-term investment in shares that he can trade. The funding company gains liquidity through access to a wider base of investors while being able to control who buys and sells and the conditions on which trading takes place. Increasing black equity in business becomes an organic, natural, self-perpetuating process.

Everyone wins in a decentralised, democratised financial market. And it’s the stock exchanges that drive the process.

As an entrepreneur, can you afford to ignore the acceleration that listing could give your business growth?

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