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Why Are My Credit Scores Different? Here Are 3 Reasons

Why Are My Credit Scores Different?

We get asked the question “why are my credit scores different” a lot here at Tippla. There’s a lot of concern that having two different scores is a bad thing, but we’re here to shine a light on why your credit ratings might be different and what it means.

Why Are My Credit Scores Different?

What is a credit score?

A credit score is a numerical representation of your creditworthiness and how reliable of a borrower you are. Your credit score falls on a scale ranging from 0 – 1,200. Your credit score will generally fall on a five-point scale – below average, average, good, very good and excellent. 

The higher your credit score, the better. This is because a high credit score indicates that you are a reliable borrower and likely to repay your debt. This is what credit providers care about the most when reviewing your application – can you pay them back?

In Australia, your credit rating is calculated by three credit reporting agencies – Equifax, Experian and illion. This means you have not one, but three credit scores in Australia. Your credit score is based on your credit report. 

What goes onto your credit report? Here’s a breakdown. Your credit report outlines your credit history, including all of your credit accounts, your repayment history, any credit applications you’ve made recently, and more. 

Sometimes your credit scores and credit reports might be different across the three bureaus. This isn’t necessarily a bad thing. Let’s find out why.

Why are my credit scores different? 

There are three main reasons why your credit scores might be different.

Equifax, Experian and illion use different scales 

As we mentioned above, your credit score is a number ranging from 0 – 1,200. However, they don’t all use the same scale. Your Equifax credit score will be a number falling somewhere between 0 – 1,200. 

The higher your credit rating, the better. Your Experian and illion credit score, however, is based on a scale ranging from 0 – 1,000. Because your Equifax credit score is based on a different scale, then it’s more likely that your Equifax credit score will be different from your Experian and illion credit scores.

In addition, Equifax, Experian and illion all classify your credit scores differently. For example, a good credit score for Equifax is 622 – 725. Anything less than this is either average or below average. Experian, on the other hand, classifies 625 – 699 as a good credit score, and illion categorises a score falling between 700 – 799 as good.

They use different algorithms to calculate your credit score

As Tippla recently covered, the different credit bureaus all use different algorithms to calculate your credit score. Exactly how they do that is a well-kept secret, but we do know a few things. 

Namely, Equifax, Experian and illion all place an emphasis on your repayment history. Do you make your credit repayments on time, have you ever defaulted on a repayment? This is what the credit bureaus particularly look out for. 

Other things the credit bureaus look out for are:

  • How many credit accounts you have;
  • How many credit applications you’ve made in the past five years;
  • Court judgements;
  • Bankruptcies;
  • Serious credit infringements.

The credit bureaus determine what counts the most towards your score, and how much weight each of these items have. This is why you might have a different score across the three bureaus.

Not all lenders and banks report to all credit bureaus

Your credit score is based on your credit history outlined in your credit reports with the three reporting agencies. Each month, credit providers such as banks, lenders and utility providers, report to the credit reporting agencies. However, they don’t necessarily report to each one. 

Say you have a credit card with a bank. Each month that bank might only send information on your repayment and credit activity for the month to Equifax and not the other two bureaus. Therefore, when Equifax is calculating your score, it is considering all of the information provided to it by your bank, alongside any other information it might get from other companies you have credit accounts with. 

However, because Experian and illion aren’t getting this information each month, it isn’t being factored into your score. If you have good credit behaviour, then this might not be contributing to all your credit scores. On the other side, if you have a bad credit history, it might not affect all your credit scores.

Did you know: sometimes you might only have one or two credit scores

If you have a credit history, then you’ll likely have three separate credit scores with each of the credit reporting agencies. However, this isn’t always the case. If you only have one type of credit or minimal credit activity, then you might actually not have a credit score with all three. 

Think of it like this. Let’s go back to the same situation as earlier – you have a credit card with a bank. That bank only reports your credit information to Equifax. That means Experian and illion aren’t getting that credit information. 

Now, say that’s the only credit you have – you’ve never taken out a loan, and you don’t have any utilities in your name. Besides this credit card, you don’t have any credit information, and Experian and illion aren’t getting that information. To these two credit reporting agencies – you don’t have any credit history. 

Your credit report would be blank and, therefore, you don’t have a credit score. This is why sometimes you can have a credit score with one of the reporting agencies, but not with all three.

Why are my credit scores different?

To sum this up, there are three main reasons why your credit score might be different across Equifax, Experian and illion. These are:

  1. Equifax uses a different scale than Experian and illion;
  2. They all use different algorithms to calculate your score;
  3. Not all credit providers report your information to all three credit reporting agencies.

Whilst these are the three main reasons why your credit scores are different across the three agencies, that doesn’t mean they are the only reason. Another reason, and one you should really look out for, is mistakes on your credit report. 

1 in 5 credit reports has some kind of mistake on them. This could include the wrong address, incorrect or outdated personal information, or sometimes it could be a larger mistake such as a credit account that you don’t actually have. Mistakes can harm your credit score, so it’s important to check your report frequently to make sure all of the information is up to date and correct.

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How Are Credit Scores Calculated in Australia?

how are credit scores calculated

There’s a lot of uncertainty when it comes to credit scores. There’s one question, in particular, that has a lot of mystery surrounding it – how are credit scores calculated in Australia? We’re here to pull back the curtain and give you all the information you need.

how are credit scores calculated

Credit scores in Australia

Before diving into how your credit scores are calculated, you must understand what your credit score is. In Australia, three credit bureaus calculate your credit score – Equifax, Experian and illion. Your credit score sits somewhere on a scale ranging from 0 to 1,200. The higher your score, the better.

Your credit score is a number that represents how trustworthy of a borrower you are – i.e. how likely you are to make your repayments if you take on some kind of credit. There are many things that constitute as credit. 

Examples of credit

The following are examples of different types of credit in Australia:

  • Credit card;
  • Loans – personal loans (secured and unsecured), car loans, home loans (mortgage), business loans, student loans and more;
  • Buy Now Pay Later services;
  • Mobile phone;
  • Internet;
  • Electricity or gas;
  • Water.

Your credit score is based on many factors. These include your credit history – do you always make your repayments on time, have you applied for credit recently, and if so, how many applications did you make? Other factors include more serious credit infringements – have you gone through bankruptcy, have you entered into default?

What is a good credit score?

Your credit score generally falls on a five-point scale – below average, average, good, very good and excellent. The higher your credit rating, the better it is. Not only does having a good credit score feel nice, but it could also unlock many financial benefits for you. 

These include lower interest rates when you take on some kind of credit, a larger variety of credit options, and better terms. All of these benefits could save you money, and all it takes is a good, or even excellent credit score.

So what is a good credit score? A good credit score differs between each of the bureaus. Here’s how Experian and Equifax categorise credit scores in Australia.

Equifax and Experian credit scores

Source: Equifax and Experian

Understanding the difference between your credit score and credit report

What is the difference between your credit score and credit report? Simply put – your credit score is a number, ranging from 1 to 4 digits. This number gives lenders and credit providers insight into how reliable of a borrower you are. 

Your credit report is also referred to as a credit file, however, is what determines your credit score. Your credit report contains detailed information on your credit history. It outlines your credit accounts, credit enquiries (otherwise referred to as credit applications), defaults, judgements and details your credit history. 

If the information contained within your credit report demonstrates good credit behaviour, then you’re likely to have a credit score falling somewhere between good to excellent. If your credit report shows too many credit applications, defaults and serious credit infringements, then you’re likely to have a score ranging from below average to average.

Here’s an overview of what goes on your credit report and how long it stays there:

Activity Average length on your credit report
Credit Accounts Any open credit accounts and accounts that have been closed in the past two years will appear on your credit report.
Credit Enquiries Any application you have made for some type of credit, whether it be a loan or credit card, will appear on your credit report for 5 years. It will appear on your report regardless of whether you went ahead with the credit, and if you were approved or rejected.
Repayment History Your repayment history over the past 2 years will appear on your credit report.
Defaults Your credit report will show if you have defaulted on any repayments in the last 5 years.
Court Judgements Same with defaults, if you have received any court judgements in the last 5 years, then it will appear on your account.
Bankruptcies If you enter into bankruptcy, it will remain on your report for 5 years.
Serious Credit Infringements Any serious credit infringements will stay on your report for up to 7 years.

How does Equifax calculate my credit score?

Credit bureaus like to keep the exact algorithm they use to calculate your credit score close to their chest. Nonetheless, they have revealed certain information about how they calculate your credit score.

According to Equifax, the general factors considered in credit score calculations are as follows: 

  • The number of accounts you have;
  • The types of accounts;
  • The length of your credit history;
  • Your payment history.

Equifax has also outlined the below information as its standard Credit Score model used in its assessment. Of course, this is only a general overview and it is subject to change. Nonetheless, it provides a good picture of what the credit bureau deems as the most important.

how equifax calculates credit scores

How does Experian calculate my credit score?

Now you have a better understanding of how Equifax calculates your credit score, let’s take a look at how Experian calculates your credit score. As highlighted by the bureau itself: “Your Experian Credit Score is calculated applying a statistical algorithm that uses past events to predict future behaviour. Each credit bureau uses a slightly different algorithm and does not disclose in detail how this is calculated.”

Experian does go on to outline some key attributes that are used to generate your credit score. This includes:

  • Type of credit providers that have made enquiries on your report;
  • The type of credit you have applied for;
  • Your repayment history;
  • The credit limit of each other credit products;
  • Negative entries;
  • The number of credit enquiries (credit applications) you have made.

Whilst we don’t know how much each of these items weighs when it comes to calculating your score, you can assume that the above factors will have some influence on your rating. Therefore, if you want to have a good credit score or higher, then you could ensure that you employ positive credit behaviour regarding the above items.

How does illion calculate my credit score?

Last but not least, let’s take a look at how illion calculates your credit score. On its website, illion says that it determines your credit rating by looking at whether you’re reliable with paying your bills. 

Furthermore, the credit reporting agency also outlines that the following events could harm your credit score:

  • Not paying your bills on time, or failing to pay them at all;
  • Applying for credit too often;
  • If someone else defaults on a joint debt.

With this in mind, we can assume that paying your bills on time and spacing out your credit applications could have a positive impact on your credit score.

Credit score calculator

Unfortunately, there’s no such thing as a credit score calculator. However, there are several ways you can check your credit rating. If you’re just wanting to know your credit score, then there are many free online sites you can use. Similar to Tippla, you can sign up in minutes, and you’ll usually need to provide some kind of identification, like your driver’s licence.

However, if you also want to see your credit report, where all the important information is, then some of the online sites won’t be able to help you. This is where Tippla can help! 

With Tippla, not only can you check your credit score, but you can also see your full credit report for both Equifax and Experian. This provides you with a more thorough overview of your credit situation. The sign-up process takes just minutes and it is completely free.

Alternatively, you can get your report directly from each of the credit bureaus. However, you will have to wait 10 days to get your report. If you want your credit report within 10 days, then you might have to pay for it. You might also incur a fee if you ask for a copy of your credit report more than once a year.

How to improve my credit score

There are many ways you can improve your credit score. We recently put together a helpful guide on how to improve your credit score. Here’s a breakdown:

Space out your credit applications

One way you can improve your credit score, or at least, limit the damage to your credit score, is by spacing out your credit applications. When you apply for any type of credit, the lender will look at your credit report. This registers as a hard enquiry on your report and harms your credit score for a time. 

The more applications you make in a short period, the more damage it will do. If you space out your credit applications, then you can limit the damage to your credit score. Not only that but multiple applications in quick succession can indicate to lenders and credit providers viewing your report that you are in financial distress. Regardless of whether this is the case or not, it could lead to you being rejected for a loan.

Make your repayments on time

As outlined by the three credit bureaus, your repayment history is factored into your credit score. For some, it is the most important ingredient. That’s why ensuring that you make your repayments on time is important if you want to have a good credit score.

Keep your credit accounts open

Whilst having too many lines of credit open can be bad for your credit score, it can also be good to keep your credit accounts open, even if you’re not using them. Confused? It does sound contradictory. Here’s how it works. 

The age of your credit account matters, and it can contribute positively to your credit score. The older the account, the better it is for your rating. That’s because it demonstrates that you can consistently handle a line of credit.

Check your credit report frequently

If you want to stay on top of your credit score, then it’s a good idea to check your credit report frequently. Your report can change often, sometimes even multiple times a day. You can never be too careful. 

If you become familiar with your report and score, then you can see if it drops or increases. Then you can take a look at your report and see what’s changed. This can give you a good insight into what’s good and bad for your score. 

Keep an eye out for mistakes on your credit report

1 in 5 credit reports will contain some kind of mistake on them. Not only can mistakes harm your credit score, but they could also be an indicator that you’ve been subject to credit card fraud. That’s why it’s important to check your report and score often.

How Are Credit Scores Calculated in Australia?

Unfortunately, there is no clear answer to the question “how are credit scores calculated in Australia”. This is because the credit bureaus won’t reveal their exact formula for calculating credit scores. Nonetheless, if you do these following things, then it could be the difference between having a good and bad credit score:

  • Make your repayments on time;
  • Pay your bills;
  • Don’t make too many credit applications in a short period;
  • Check your credit report frequently;
  • Don’t take on too much credit.

Want to know more about your credit score? Head to Tippla’s blog where you can find many informative articles and guides on your credit score. If you want to view your free credit report, you can sign up to Tippla and have your credit score and report within minutes.

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How To Reduce The Interest On Your Personal Loan

how to reduce the interest on your personal loan

A lot of people don’t realise just how much interest can cost you when you take out a personal loan. That’s why we’ve put together this helpful guide on how to reduce the interest on your personal loan.

how to reduce the interest on your personal loan

The average personal loan in Australia

A lot of Aussies rely on personal loans. According to data from the Reserve Bank of Australia (RBA), the total amount of outstanding personal loans in Australia was more than $145.5 billion as of September 2020.

The RBA also reports that the average variable interest rate for a personal loan is 14.41% and 12.42% for a fixed personal loan.

In ustralia, there are two main types of personal loans – secured personal loans and unsecured personal loans.

How to reduce interest on personal loans

There is a range of different personal loans available in Australia – short-term, long-term, secured, unsecured, fixed-rate and variable rate – the list goes on and on. 

Tippla recently put together a guide on how to reduce the interest on home loans. As was the case with home loans, if you want to reduce the interest on your personal loan, then you could compare all of the different options available to you. MoneySmart recommends comparing these features:

Comparison rate
  • a single figure of the cost of the loan – includes the interest rate and most fees
  • make sure you’re comparing the same loan amount and term
Interest rate
  • the rate of interest you’ll pay on the amount borrowed
Application fee
  • the fee when you apply for a loan
Other fees
  • the monthly service fee
  • the default fee or missed payment fee
  • any other fees — read the terms and conditions to find these
Extra repayments
  • whether you can make extra repayments without paying a fee
Loan use
  • some loans can only be used for specific things like buying a car or home renovations
  • make sure you can use the loan for what you need
Loan term
  • shorter terms often have lower interest rates
  • longer terms usually mean lower repayments, but you’ll end up paying more interest

Source: MoneySmart

In Australia, you can also get a low-interest loan and a no-interest loan. They can also come with no fees and fast approval. 

Pay off your personal loan quickly

When you take out your personal loan, you will be charged a set amount of interest each month which will be factored into your repayment amount. Therefore, the quicker you pay off the loan, the less interest you will pay. Say you get charged 14% interest each month for a 6-month short-term loan, and your repayments are $100, you’re paying an extra $14 each month. 

Now say, you pay off your loan in 4 months instead of 6, you’ve saved yourself $28. Now imagine this on a larger scale, and you could really save yourself a lot of money.

We’ve put together a number of ways you could pay off your personal loan faster.

Round up your repayments

A simple way you could repay your loan faster and save yourself from having to pay all of the interest is by rounding up your repayments. Say your monthly loan repayment is $235 a month. If you instead repaid $250 a month, then you’ll reach the end of your loan faster. Depending on the loan term, you could be saving yourself months worth of interest by doing this.

Before you start making these extra repayments, check if there’s an early exit fee or any other fees that you might be charged.

Pay fortnightly, instead of monthly

Similar to rounding up your repayments, if you change the schedule of how you repay your loan, you could save yourself in interest. But how does switching your repayments to fortnightly from monthly make a difference?

Let’s say your loan repayment is $200 a month, over a 2-year period. Instead of paying that amount each month, you could pay $100 each fortnight. This way, you’ll end up paying more in the long run, as there are 26 fortnights each year (you’ll pay $2,600 instead of $2,400). This way, you could repay your loan months ahead of schedule, and save on interest.

Make additional repayments

Another way you could repay your loan faster is by making additional repayments when you can. By doing this, you could keep to your normal repayment schedule, but make impromptu repayments as and when you can afford them. The amount is up to you – any additional repayments will bring the end of your loan quicker, and that could save you a lot in interest.

Long-term loans aren’t always best

A lot of people might be tempted into getting longer-term loans with lower interest rates, thinking it will save them more money in the long run. However, this isn’t always the case. 

As an example, say you borrow $1,000. If you take out a short-term loan with a 3-month repayment period and a 14% interest rate. Throughout the loan, you’ve paid $420 in interest.

On the other side, imagine you take out a longer-term loan of the same amount, with a 2% interest rate over 2 years. That 2% interest rate is dramatically smaller than 14%. However, over the 2 years, you’ll end up paying $480 worth of interest, which is $60 more than the higher-interest short-term loan.

Refinance your personal loan

If you’re trying to reduce the interest rate on your personal loan, there is also the option of refinancing your personal loan. This is when you take on a new loan to pay off your existing one. There are a number of reasons why people decide to refinance their loans:

  • To get a lower interest rate;
  • To get a shorter, or longer loan term;
  • To consolidate their debt.

Why refinance your personal loan?

When you refinance your loan, you might be able to get a better deal than your existing one. This is especially true if your credit score has improved since you took out the initial loan. Generally speaking, the better your credit score, the better the interest rates and conditions available to you will be. Therefore, if your score has improved, then you might be able to get access to better deals compared to your initial loan term and that could save you. 

Debt consolidation

Refinancing your personal loan could allow you to consolidate your debt. If you have debt from multiple sources, such as numerous personal loans, then you might be able to combine this into one debt consolidation loan. A debt consolidation loan combines all your current debts into one single debt with one interest rate and one repayment date. 

The benefits of doing this include ease. You will only have to worry about one loan. That means one loan, one interest rate and one repayment schedule. By going down this road you might be able to get a better interest rate overall and save money.

However, there are some things to consider. You’re not guaranteed a lower interest rate when you take on a debt consolidation loan. In some instances, consolidating your debt could mean that you are paying higher interest rates, which means you’ll end up paying more in the long-term. 

On top of this, you might be charged extra fees by your provider, such as establishment fees, fees for paying off your other debt early, etc. These extra fees could outweigh the benefits of the lower interest rate. That’s why it’s a good idea to carefully weigh up your options and read the terms and conditions.

Access to more finance

If you refinance your loan, you might be able to get access to a higher credit limit. This could be good if you’re in need of extra finance. Perhaps your situation has changed, your family has expanded – the list goes on and on. 

Refinancing your loan could be an easy way to accommodate this. However, taking on a higher credit limit means you’ll have more to repay. It’s important to ensure you can make the repayments before taking on a higher limit.

Credit cards in Australia

As Tippla recently covered, a lot of Aussies have credit cards. There were 13,668,490 credit cards in circulation as of November 2020, according to Finder. Credit cards are similar to personal loans – they are a line of credit that you have to repay. Like personal loans, they often come with interest and extra fees.

How to reduce the interest on your credit card

There are several ways you could reduce the interest on your credit card. For example, you could opt for a low-interest credit card.

Another thing you could do is pay off your credit card each month in full. With credit cards, you don’t have to repay everything that you spend each month. Most credit cards come with a minimum monthly repayment. 

This is the minimum amount you have to pay each month to meet your credit agreement and avoid late fees. This is usually around 2 or 3% of the total amount you owe for the month.

However, as we explained in our previous article when you only repay the minimum amount, your remaining balance is charged interest. Head to our article to see why doing this can quickly increase your credit card debt.

With this in mind, to avoid paying extra interest, you could pay off your credit card in full each month. To achieve this, you could set up a budget and be careful with the purchases made on your credit card. You could try to only spend what you’re sure you can afford to repay each month.

How to reduce the interest on your personal loan

There are a number of ways to reduce the interest on your personal loan. These include:

  • Comparing multiple loans to get the best deal;
  • Paying off your loan quickly;
  • Opting for loans with shorter terms;
  • Refinancing your loan.

If you’re unsure of what’s the best option for you, you can reach out to a free financial counsellor. They can explain your options and help you make the best decision for you.

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Can You Use a Personal Loan to Pay Off Credit Card Debt?

As spending picks back up in Australia, more and more Aussies will be accruing a credit card debt. This has led to many asking the question – can you use a personal loan to pay off credit card debt? We’ve put together this handy guide outlining the pros and cons, as well as explore other options.

Credit card debt in Australia

Credit card debt in Australia fell during 2020, hitting its lowest level in more than 15 years. There were a few factors contributing to this – reduced spending during the pandemic, and Aussies switching to other lending services such as Buy Now Pay Later (BNPL).

According to figures from the Reserve Bank of Australia (RBA), throughout the pandemic in 2020 $6.3 billion in credit card debt was removed. This is a reduction of 23.5%.

Whilst these figures were reassuring, it appears that Aussies have been making up for lost time towards the end of the year, and so far into 2021. Across the Christmas period, Australians generated $24 billion in credit card debt.

Forecasts for this year expect consumer spending to increase in 2021 and again in 2022. According to Trading Economics, consumer spending in Australia is expected to be $271.25 billion in 2021 and $279.39 billion in 2022.

Loosely translated, increased consumer spending this year and in 2022 could see credit card debt back on the rise. That’s why it’s good to know your options.

Paying off credit card debt

A credit card is a line of credit that you can use to make purchases – both online and in person. You can also make balance transfers and cash advances. Unlike debit cards, you’re not limited to the money in your bank account. Similar to personal loans, credit cards provide you with extra finance set at a predetermined amount, which resets each month.

The extra finance provided by credit cards isn’t free money. You have to pay back what you spend. At the very least, you will need to make the minimum repayment every month by the due date of the balance if you want to avoid late fees.

With a credit card, you have a few options.

Pay off your credit card debt in full

Each month you will receive a credit card statement. This outlines all of your transactions and the amount you owe. The most cost-effective way to pay off your credit card is to pay it off in full each month. This means you pay back the full amount that you spent during the month.

Paying off your credit card debt in full is the most cost-effective way because this way you don’t carry over any debt into the next month, which will generally incur extra interest. However, it’s not always possible to pay off your credit card bill in full each month. If you have an unexpectedly expensive month, you might not have enough to settle the debt. That’s why there are other options.

Repay the minimum monthly repayment

Most credit cards have a minimum monthly repayment option if you can’t repay your full credit card bill. The minimum monthly repayment is the lowest amount you can pay in order to meet your credit agreement and avoid late fees. The minimum monthly repayment is usually about 2 or 3% of the total amount you owe for the month. 

So what does this mean? Well, you don’t actually have to pay off your whole credit card bill each month. You only have to pay the minimum repayment if that’s all you can afford. But there’s a catch. You will still accrue interest on the remaining amount owing, which could cost you more in the long run.

Want to know how quickly credit card debt can get out of hand? Tippla recently covered why only making the minimum repayment can cost you in the long run.

Consequences of not paying off your credit card debt

If you don’t repay your credit card debt, or make the minimum repayment at the very least, there can be quite a few consequences. Whilst each credit card issuer has a different approach to late payments and defaults, we’ve put together a general overview of some of the consequences.

Personal loans in Australia

A personal loan is a type of instalment loan where you borrow a fixed amount of money. With a personal loan, you generally repay it on a monthly or fortnightly basis with interest. When you’ve paid back the loan your account is closed.

A lot of Australians rely on personal loans. Data from the RBA showed that the total amount of outstanding personal loans in Australia was more than $145.5 billion as of September 2020.

Can you use a personal loan to pay off credit card debt?

If you’re struggling to repay your credit card debt, you might be thinking about taking out a personal loan. But is this a good idea? We’ve outlined some of the pros and cons of doing this.

If you’re not sure what’s the best option, you can seek the advice of a financial advisor, who can help you make the best decision for you.

Consequences
Fees and interest
  • If you default on your credit card you could be charged late fees. Whether this occurs will depend on the conditions of your credit card;
  • You’ll likely be charged additional interest on all transactions during the statement period. You could also be charged interest on your late payment fees.
Impact on your credit score
  • Defaulting on your credit bill can harm your credit score. The extent of the damage will depend on how late your payment is and when you settle the bill;
  • In addition to hurting your credit score, defaulting on your credit card bill will stay on your credit report for 2 years. This means if you apply for a loan or credit with a financial institution in the 2 years after the default, they will be able to see this on your credit report. They could then reject your application.
Default notice
  • In Australia, if you have an overdue payment that exceeds $150 for 60 days or more, then it will be classified as being “in default”. Once you’re in default, your credit card issuer will provide an official notification, and this can last on your credit report for 5 years.
Impact on your reward points
  • If you have rewards attached to your credit card, such as frequent flyer points, then these could be suspended or even terminated if you default on your bill.
Debt collectors
  • If your credit card debt is passed onto a debt collector, then it could make the situation much harder to deal with.

Pros of using a personal loan to pay off credit card debt

1. You might be able to get a better interest rate with a personal loan

If you’re considering using a personal loan to pay off your credit card debt, it could be a good idea to look at the interest rates. If you carry a credit card balance then you could be getting charged high-interest rates. 

The RBA reports that the average variable interest rate for a personal loan is 14.41% and 12.42% for a fixed personal loan. With this in mind, you might want to weigh the interest you’d have to pay for a personal loan vs the interest you’ll incur if you don’t pay off your credit card bill. If a personal loan turns out to be the most cost-effective way, then it could be worth considering.

2. You could save your credit score

As we mentioned above, defaulting on your credit card bill can hurt your credit score. Not only that, but it could remain on your credit report for 2-5 years, depending on how long it takes you to repay the debt.

Whilst taking on a personal loan will result in a hard enquiry on your credit report, the damage would be less than having a default on your credit report, which can stay on your report for 5 years.

Equifax explains it like this: “Hard inquiries serve as a timeline of when you have applied for new credit and may stay on your credit report for two years, although they typically only affect your credit scores for one year.”

Again, it’s important to weigh your options. Will a personal loan stop you from being issued an official default notice? If so, then it could be worth your while to take out a personal loan.

3. You could pay off your debt quicker

When you only make the minimum repayment of your credit card bill, your debt can quickly accumulate. Before you know it, you could have a large credit card debt that could take years to pay off.

This is where a personal loan could help. It could allow you to pay off your credit card debt instantly. Then, you’d need to set up a payment plan to repay your loan. But then you wouldn’t have to worry about your outstanding debt growing each month with interest. 

Cons of using a personal loan to pay off your credit card debt

1. It could lead to more debt

Although a personal loan could help you remove your credit card debt, it could also put you in even more debt. You’re merely transferring the debt from your credit card to the personal loan. 

If you continue to use your credit card after you have removed the debt with the personal loan, then you could end up having both a credit card debt and a personal loan debt. If you choose to go down this route, you’ll need to be careful and keep an eye on your spending.

There are a range of other options you could try first before using a personal loan to pay off your credit card debt, which we’ll cover later in this article.

2. You’re not guaranteed to get a lower interest rate

Whilst personal loans might on average have lower interest rates, it’s not a guarantee. If you have a below-average credit score, then you might only be offered high-interest personal loans. If this is the case, then there might not be any benefit to using a personal loan to pay off your credit card debt. In fact, you could end up paying more in interest and fees on the personal loan than your credit card. This is something to keep an eye out for.

3. Like credit cards, personal loans have fees

Like credit cards, most personal loans have fees, including late payment fees. Some common personal loan fees include:

  • Establishment fees;
  • Ongoing monthly fees;
  • Late payment fees;
  • Early repayment fees.

It’s important to read the terms and conditions of your personal loan carefully before taking on a loan. Be sure to weigh the pros and cons, or speak with a financial advisor if you’re uncertain.

Other ways to pay off credit card debt

Can you use a personal loan to pay off credit card debt? The short answer is yes. But there are also a few things you could try first before resorting to that option.

Pay as much as you can each month

If you have a credit card and you’re not able to pay off your whole monthly bill, instead of just paying the minimum monthly repayment, you could try and pay off as much of the bill as you can. That way, you’ll have less debt carrying over into the next month, and less being charged interest. This is one way you could try and minimise your credit card debt.

MoneySmart also outlines: “If you’re finding it hard to pay the minimum amount, contact your bank or credit provider straight away or talk to a free financial counsellor. Taking action early stops a small money problem from getting bigger.”

Reduce your debt

If you find yourself in a difficult situation. You could try and reduce your debt. If you want to do this, the first thing you need to know is how much you owe. Once you know that, then you can try and move forward.

MoneySmart recommends taking the following steps:

  1. Work out what you can afford to pay;
  2. Prioritise your debts;
  3. Build a savings buffer;
  4. Get help if you need it.

When it comes to reducing your debt, there are two main methods – the snowball system and the avalanche system.

Snowball system 

The snowball system is where you look at your list of debts and organise them from the biggest to smallest amount. Once you’ve done that, you make the minimum payments towards all other debts and increase the amount for your smallest. Your goal is to pay off this one as quickly as comfortably possible. Once it is paid off, move the remaining amount from your debt budget towards the second smallest debt. 

Avalanche system 

The avalanche system has the same initial approach. You need to look at the list of debts but organise them from highest to lowest interest instead. If you mean to save money, this method could do the trick. Choose the debt with the highest interest rate. The longer you keep high-interest debt, the more it will cost you. Make the minimum repayments towards all other debts and increase the amount for your highest interest debt. While this may take a little longer, it will be very rewarding in the long run. Once this debt is paid off, your freed budget could be much bigger and can be put towards the second highest interest-debt.

Credit card balance transfer

Another method you could try is a credit card balance transfer. This is when you transfer your debt, AKA the balance, to another credit card. This could help you get on top of your debt, as you might be able to get a new interest rate of either 0% at a special low rate for a limited amount of time. This usually ranges from six months to 2 years.

A credit card balance transfer could allow you to pay off your debt faster and save you money, especially if you get a low or no interest rate deal. However, if you can’t pay off your debt quickly, then it could end up costing you more. 

Is it smart to use a personal loan to pay off credit card debt?

To answer the question “can you use a personal loan to pay off credit card” – whilst you can use a personal loan to pay off your credit card debt, that doesn’t mean you should. There are a number of things you could do before you resort to using a personal loan to pay off your credit card debt.

To summarise, you could:

  1. Reduce your debt;
  2. Pay off as much of your credit card debt as you can each month;
  3. Opt for a credit card balance transfer.

If you’re ever unsure of what’s the best decision for you, you can talk to a free financial counsellor. They’ll be able to explain your options and help you make the best decision for your financial situation.

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How to Reduce the Interest on Your Home Loan

When you take out a loan, you’re not only paying back the amount you’ve borrowed but the interest on top of the loan. This extra interest can add up over the long-term. That’s why we’ve put together this helpful guide on how to reduce the interest on your home loan.

Mortgages in Australia

2020 was a good year for the housing market in Australia. According to the Australian Bureau of Statistics (ABS), the total value of new loan commitments for housing and the value of owner-occupier home loan commitments reached record highs in December 2020.

In the final month of last year, the total value of new loan commitments for housing rose by 8.6% from the previous month to reach $26 billion. This is an increase of 31.2% year-on-year.

For new owner-occupied home loans, these increased by 8.7 per cent in December to reach $19.9 billion. This is up by 38.9% year-on-year. 

For first home buyers, the number of owner-occupied loan commitments rose by 9.3% to reach 15,205 for December 2020. This is stronger than December of 2019’s figure by 56.6%. According to the ABS, this is the highest level since June of 2009. 

Home loans australia 2020

In Australia, there are two main types of mortgages – fixed interest rate mortgages and variable interest rate mortgages. 

Fixed interest rate mortgages

A fixed interest rate mortgage, as the name implies, is when the interest rate of the mortgage stays the same for a set time. After this period is up, the rate will then change to a variable interest rate. Or you can speak with your provider about negotiating another fixed rate.

Some of the benefits of a fixed interest rate mortgage include consistency. It’s much easier to budget when you know exactly what your repayments will be. The downside of fixed interest rate mortgages is that if home loan rates drop, then you won’t benefit. On the flip side, if the rates increase, then you won’t have to pay extra.

Variable interest rate mortgages

If you take on a variable interest rate mortgage then your interest rate may either increase or decrease as the market changes. This could happen when the official cash rates change, for example. Whilst this type of mortgage could offer you greater flexibility, it can be harder to budget for. 

The average mortgage in Australia

Mortgage prices vary a lot in Australia. Many factors can influence the price of a mortgage. Are you buying a house, apartment, or unit? Are you buying in the city or in a rural area? Is the house new or old? These factors can influence the price of a property and the mortgage as a result. 

But what is the average mortgage in Australia? According to Mozo, as of December 2020, the average mortgage (excluding refinancing) in Australia was $477,584. 

As for the average interest rate, MoneySmart outlines that as of November 2020, the average mortgage interest rate was 2.54%. Therefore, if you have a mortgage of $477,584 for 30 years, then you’re looking at paying an extra $363,919 in interest.

How to reduce the interest on your home loan

There are a couple of ways you could reduce the interest on your home loan. Some of these can be done before you get a mortgage, and some can be done after. Let’s start with the things you can do before to reduce the interest on your home loan.

Shop around for the lowest interest rate on the market

When you’re buying a house, it’s important to do your research. Some people might go straight to their bank to ask for a home loan, but that isn’t necessarily your best option.

MoneySmart recommends that you should compare loans from at least two different lenders, but you could easily compare more to try and get the best deal. Whilst there are many comparison websites you could use to help you with this, it’s important to keep in mind that these businesses make money through promoted links and might not cover all of the options out there.

When comparing loans you should be aware of the interest rate vs. the comparison rate:

Interest Rate Comparison Rate
The interest rate shows how much interest you will be charged each year for the duration of your mortgage. The comparison rate is the combination of the interest rate and most of the fees and charges that you will incur if you take on this loan. The comparison rate is a more accurate representation of how much extra you’ll be paying on top of the loan.

 

Other things you should look out for and compare include:

  • Monthly repayment
  • Application fee
  • Ongoing fees
  • Loan term
  • Loan features

Try to get the shortest loan term

When you take out a mortgage, you will be charged interest each year. The loan term refers to the period of time you will be repaying the home loan. Therefore, the shorter your loan term, the less interest you’ll need to pay. If you shop around and get a 20-year mortgage, as opposed to 25 or 30 years, you could save yourself big time in interest.

However, whilst you may save on interest big time, generally speaking, a shorter repayment period means that your monthly repayments are higher. If you’re thinking of opting for a shorter loan term, it’s a good idea to make sure you can comfortably afford the repayments. If you’re not sure what’s the best option for you, you can reach out to a financial adviser or to a mortgage broker, who can help you through the process.

Keep an eye out for mortgage features

When you take out a mortgage, your lender might offer you a range of different features, such as an offset account, line of credit facilities, and more. When looking at any offer with additional features, you might want to check whether you will use and benefit from them. This is because extra features often mean higher interest rates. So there’s no point getting a loan with extra features you won’t benefit from and it will just cost you more in the end.

Repay your mortgage fortnightly, not monthly

Generally, mortgage repayments occur monthly. However, one thing you could do to reduce the interest on your home loan is to make your mortgage repayments on a fortnightly basis instead and cut the amount in half. 

Let’s say your mortgage repayment is $1,000 a month. Instead of paying that amount each month, you could pay $500 each fortnight. This way, you’ll end up paying more in the long run, as there are 26 fortnights each year (you’ll pay $13,000 instead of $12,000). 

By putting more towards your mortgage, you might be able to repay it quicker than the loan period. This could save you from having to pay months, or even years, of interest. Before you do this, it’s a good idea to check the terms and conditions of your home loan to ensure that you can pay off your mortgage quicker, and change the repayment schedule, without incurring additional fees.

Round up your monthly repayments

Another way you could try and reduce the interest on your loan is to round up your monthly repayments. If your monthly repayment is an odd number, say $1,115, you could round this up and pay $1,200 each month instead. Similar to changing your repayment schedule to fortnightly, this method could also see you repaying your mortgage earlier, and saving you years of interest.

Again, it’s important to make sure the terms and conditions of your mortgage won’t penalise you for doing this. If you’re uncertain, you can speak to a financial adviser who can help guide you through your options. 

Get a health check on your mortgage

Just like you get a check-up on your health, you can do the same thing with a mortgage. Home loans often come with features which you pay premiums for, such as an offset account. Numerous mortgage and financial companies advise that you review your mortgage regularly with an experienced mortgage broker. With their help, you might be able to save money by negotiating a better deal with your existing lender or get a new deal with a different provider.

Extra tip: Save a larger deposit to avoid Lenders Mortgage Insurance

In Australia, when you want to buy a house, banks and lenders typically require you to have a deposit that’s 20% of the property’s value. Let’s say the property is worth $500,000, then you’d need a deposit of $100,000.

Some lenders and banks will allow you to have less than a 20% deposit if you have sufficient income to support the loan. To offset the lower deposit, you will be charged a one-off premium to your home loan – Lenders Mortgage Insurance (LMI). You can also be charged a Low Deposit Premium (LDP).

LMI protects lenders against the risk of you defaulting on your home loan. The size of your LMI premium is based on the size of your deposit and how much you borrow. The bigger the deposit, the lower your LMI premium will be. According to the Commonwealth Bank, financial institutions will need you to take out LMI when there is an increased risk associated with your loan – ie. a deposit lower than 20%.

If you want to avoid LMI and LDP, then you could save up a bigger deposit. That way, lenders might not see you as a big risk. This could save you thousands of dollars.

How to reduce the interest on a home loan

Because home loans are often a long-term commitment, you can end up paying a lot in interest. So what are some of the key ways you can reduce the interest on your home loan? 

Let’s sum it up for you:

  • Shop around for the lowest interest rate on the market;
  • Try and get the shortest loan term within your budget;
  • See if bonus features are worth the cost;
  • Repay your mortgage fortnightly, instead of monthly;
  • Round up your repayments;
  • Get a health check on your mortgage regularly;
  • Bonus tip – avoid LMI if possible.

If you try and utilise any of these suggestions, you could save big time. Before you make any decision, you should always check to make sure you can afford it, and that it’s within your means. If you are unsure, you can consult a mortgage broker or financial adviser for advice. Either way, it’s good to know your options!

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How to Use Credit Cards Effectively: A Guide

how to use credit cards effectively

Millions of Australians have some kind of credit card. But there’s a difference between having a credit card and utilising a credit card. To help with this, Tipple has put together a helpful guide on how to use credit cards effectively.

how to use credit cards effectively

As of November 2020, there were 13,668,490 credit cards in circulation, according to comparison site Finder. These credit cards netted a national debt accruing interest of $20.9 billion. At the same time, the number of debit cards in circulation was more than double, at 34,861,747.

With this in mind, it’s clear that a lot of Aussies are using credit cards to help with their finances. So let’s dive into the ins and outs of credit cards.

What is a credit card?

When you take on a credit card, you are getting a line of credit that you can use to make purchases, balance transfers and cash advantages. Where a debit card limits you to the money you have in your bank account, credit cards are like a loan. This is because they provide you with extra finance which is set at a predetermined amount.

Like a loan, you have to pay back your credit card. At the very least, you will need to make the minimum repayment every month by the due date of the balance.

As highlighted by Investopedia: “Credit cards impose the condition that cardholders pay back the borrowed money, plus any applicable interest, as well as any additional agreed-upon charges, either in full by the billing date or over time.”

Who offers credit cards?

In Australia, there are a lot of options when it comes to credit cards. In fact, there are hundreds of options available. Nowadays, banks don’t offer one type of credit card. They often offer multiple different types of cards all serving different purposes. You can get access to low-interest credit cards, no annual fee credit cards, balance transfer credit cards, and rewards credit cards. 

Rewards cards can vary. A common one is credit cards tied to the frequent flyer points of main airlines such as Virgin and QANTAS.

The benefits of credit cards

With anything in life, there are both pros and cons to having a credit card. Let’s start first with the benefits of credit cards.

Access to extra finance

One of the main reasons people get a credit card is because they want access to a line of credit. A credit card allows you to spend money you might not have in your bank account at that very moment. It gives you the freedom to buy what you want and need without restricting you to your bank account.

This extra line of credit can become especially useful in emergency situations. You can deal with the problem right away and not have to wait until payday. It is very important to highlight that a credit card isn’t free money. You have to pay back everything you spend. So it’s good to be careful that you don’t fall into the trap of overspending and putting yourself into further debt.

Build up your credit score

One benefit of having a credit card is that you could use it to create a good credit history and boost your score. If you make your monthly repayments on time and don’t max out your credit card, then it could boost your credit score.

Rewards

A lot of credit cards have some kind of rewards programs where you can earn bonuses. This can range from frequent flyer points, bonuses tailored to specific stores, cashback and extras such as travel insurance.

Security

Another benefit credit cards can offer is the added security when shopping online. As we recently highlighted, online financial fraud and credit card fraud in Australia is a real threat. This is when scammers will somehow access your card details and use them to shop online.

If you use your credit card to shop online, if scammers do get access to your credit card details, then it’s not connected to the money in your bank account. However, if fraudsters get your debit card details, then they will be draining your personal money.

If you are a victim of credit card fraud, you will most likely not be liable for the money stolen. Generally, once you alert your bank or financial institution about the fraudulent transaction(s), they will freeze your card and reimburse you the funds.

However, there are some situations where you could be liable for the lost funds. For example, if you display your pin obviously on your credit card for all to see, or you took too long to notify the bank, then you might be liable for the fraudulent charges.

In Australia, most credit cards now come with a chip on them, in addition to the magnetic strip. The encryption of chip cards helps to prevent fraudsters from stealing your card information during point-of-sale transactions.

The downside of credit cards

Whilst there can be numerous benefits to having a credit card, there are also a few things to watch out for. Whilst credit cards give you access to extra cash, you do have to pay that money back. 

Fees and interest

When you take on a credit card, depending on which one you select, you might have to pay credit card fees and interest. This means, when you spend money on your credit card, you might end up having to pay back more than you anticipated. 

When you apply for a credit card, you should read the conditions of the card carefully and make sure you can afford the repayments. It’s also important to be aware of what actions trigger fees and interests on your repayment.

Minimum repayments

Most credit cards have a minimum monthly repayment. This is the lowest amount you have to pay in order to meet your credit agreement. The minimum monthly repayment is usually about 2 or 3% of the total amount you owe for the month. 

This means that you don’t actually have to pay your whole bill when you have a credit card, you only have to pay the minimum repayment by the due date to avoid paying late fees. However, you will still accrue interest on the remaining amount owing, which could cost you more in the long run.

Here’s an example of how the minimum monthly repayment works. Say your credit card charges you 10% interest per year and you spend $1,000 on your credit card in one month. If your minimum repayment is 2%, then you would have to pay at least $20 by the due date to avoid late fees. However, the remaining $980 that you haven’t paid will be charged the interest rate, which will cost you an extra $98. 

This $98 in interest will be added to your outstanding balance for the next amount. Then you’ll have to pay interest on the new amount. Taking into account that you’ll probably spend more in the next month, you can see how your credit card debt can quickly get out of hand!

credit card debt

Maxing out your card

Maxing out your credit card is when you reach your credit card limit. Say your credit card limit is $8,000, then maxing out your credit card would be when you spend all of that $8,000 in one month.

When you max out your credit card, you can’t make any more purchases until you make a repayment. Depending on your card conditions, you might incur fees and charges when you max out your card, which means you’ll have to pay even more back.

When you max out your credit card, it means you have a lot more to repay. Even the minimum repayment amount is higher. 2% of $1,000 ($20) is a lot less than 2% of $8,000 ($160). And 10% interest on $980 ($98) is a lot less than 10% on $7,840 ($784). 

If you prefer to pay off your credit card in full each month, then you might struggle to fully repay your credit card bill if you max out your card. Like with anything, it’s important to only spend within your means so you don’t put yourself into a difficult situation.

Rewards programs

Although credit card rewards programs can be a great way to increase your frequent flyer points simply by spending money, it is important to carefully read and understand the conditions of the cards.

Often, cards with rewards programs come with higher interest rates and additional fees. Sometimes these extras can actually offset the benefits that you get through the rewards program. That’s why it’s a good idea to carefully examine the rewards programs and see if it will work out better for you in the long run.

How to use credit cards effectively

With the pros and cons for credit cards outlined, now it’s time to get into how to use credit cards effectively. When it comes to your credit card, you shouldn’t be over-reliant on it. It is a tool that when wielded properly, could greatly benefit your life. However, credit card debt can be a slippery slope.

So how could you use credit cards effectively? You could start off by finding a credit card that meets your needs, whatever they might be. You should read the terms and conditions carefully. It’s important to always keep in mind that whatever you spend, you need to repay.

Keep an eye on your balance

One way to use your credit card effectively is to avoid maxing out your card. You could do this by keeping an eye on your balance. Investopedia outlines that it’s better to keep your card balance low relative to your credit limit. This is because maxing out your credit card can harm your credit score and indicate to lenders that you’re a risky borrower.

As we mentioned above, there are numerous drawbacks to reaching your limit. These include extra fees and charges, the inability to use your card until you make a repayment and higher risk of defaults.

Make more than the minimum repayments

Although you don’t have to pay more than the minimum repayments by the deadline each month, it could work out a lot better if you do. This is because it could save you from being charged extra interest. 

In fact, the best thing you could do is to pay off your credit card in full each month. That way you won’t be charged interest on the remaining debt, and you won’t carry credit card debt into the next month.

Pay your credit card bill on time

Each month, you will receive your credit card bill, outlining all of the transactions you’ve made during the month. Once you receive your statement, you will have a fixed time to pay off your credit card, or at the very least, make the minimum monthly payment to avoid late fees.

When it comes to your credit card, it’s important to pay your credit card bill on time. If you don’t you’ll most likely have to pay late fees and in some cases, extra interest. Not only that, but it could be good for your credit score. Even if you have a credit card that has 0% interest or 0% balance transfer terms, these will likely become void if you are late making your repayments.

Your repayment history is one of the most important factors when it comes to your credit score. If you don’t pay your bills on time or miss them altogether, it could harm your credit score. Therefore, one way to use your credit card effectively is by paying your bill on time.

Be on the lookout for credit card fees

You can incur credit card fees for a number of different reasons and they can add up over time. That’s why it’s important to know what fees you can be charged with your particular card and what triggers them.

credit card fees

Credit cards and your credit score

Your credit score is based on your credit history. Good credit behaviour can improve your rating, as can bad credit behaviour. If you are to miss a credit card payment, then this will show up as a default on your credit report and negatively affect your credit score.

How to use your credit card effectively

There are a lot more aspects to credit cards than meets the eye. There are many things you could do to make sure you’re getting the most out of your credit card. You could repay your credit card in full each month, avoid over-relying on your card, make sure to pay off your bill each month on time and more.

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Frugal Hacks for 2021 | Prepare For The End Of JobSeeker

frugal hacks 2021

Make saving money fun with these frugal hacks for 2021!

frugal hacks 2021

We’re well into 2021 (where did January go?). Now that Christmas and the holiday period is over, it’s time to think about saving money to set up our future self for success. There are so many different ways you can save money. But we’re here to make saving money fun with these 10 frugal hacks for 2021!

Saving during the COVID-19 pandemic

The coronavirus pandemic was especially good for Australian households. In the second quarter of 2020, the Australian household savings rate reached an all-time high of 22.10%.

According to the Australian Bureau of Statistics (ABS), this is because consumer spending dropped amid lockdown measures coupled with boosted social assistance benefits, such as JobSeeker and JobKeeper.

With JobSeeker set to end on the 31st of March 2020, Aussies won’t be able to rely on the extra cash. That’s why it’s good to get into some healthy and easy habits early, so you can still save money into 2021. 

Back to basics: set up a budget

Before we get into the savings hacks, we’d like to highlight the importance of a budget first. If you’re wanting to save money, it’s a good idea to have some kind of budget in place. There are many budgeting options available for you.

When it comes to what type of budget you should choose, well that decision is up to you. The most suitable budget for you will depend on your life circumstances and your savings goals.

There are many different budget hacks you can try to make your budget stick. You could download a savings or budgeting app that will help you sort out your expenses based on categories. You could try and set limits for certain categories, such as eating out, alcohol, exercise, etc.

10 Frugal Hacks for 2021

Let’s get stuck into the frugal hacks you could try this year, to increase your savings and set your future self up for success.

Make a grocery list before you shop

Do you hate the hassle of going to the grocery store? Trekking up aisle after aisle. Reaching over people to get what you want. Socially distance in the narrow aisles. It can be a real chore. So why not reduce the time you’re there?

There are two ways you can do this. You could make sure you have your grocery list written down and ready to go before you head to the shops. That way when you arrive, you know what you need. You can get in and out quickly. When you have a shopping list you’re also less likely to buy things you don’t need – even if Tam Tams are on sale! Writing a grocery list can save you time and money.

Order your groceries online

Want to take it one step further and avoid the aisles of the grocery store altogether? Why not order your groceries online. Most of the supermarkets allow you to order your groceries online. This way you don’t have to walk up and down the aisles. You can choose your food and items from the comfort of your own home. You could either get them delivered or if you want to save money, pick them up from the supermarket at a designated time.

Meal prep, or cook in bulk

The 5 Ps – prior preparation prevents poor performance can be applied to this next saving hack – meal prep or cook in bulk. You would be surprised how quickly buying lunch at work adds up. 

One easy way to save money is to meal prep. When you have a free moment on the weekend, you could make a big dish – perhaps a curry, stir fry or something that’s easy to make in bulk. Whatever you choose, you can freeze all of the different meals and then take them during the week for lunch. Then you can save money on buying lunches out. Nothing beats a home-cooked meal, right?

If you don’t have time to make a few dishes over the weekend or whenever you have your day off, there’s another hack you could try. Have you ever ordered at a restaurant? Take that principle and apply it to your cooking – make more than you can eat in one sitting. That way you’re guaranteed to have leftovers and you can take the leftovers for lunch the next day, or even the day after!

Buying in bulk – it’s not just for toilet paper

Just like cooking in bulk and freezing the leftovers is a good way to save money, so is buying in bulk. It often works out to be cheaper to buy non-perishable items in bulk. If you buy products that you use regularly, such as toothbrushes, toilet paper and detergent, they are often much cheaper when you buy them in jumbo sizes.

When you buy in bulk, instead of only buying products when you need them, time is on your side. This means you can wait until an item is on sale to buy enough to last you for a few months, instead of being forced to buy something at full price because you’ve run out.

Reduce your takeout coffee, embrace water

Just as buying your lunch out every day can hurt your wallet, so can buying a coffee every day! According to Statista, in 2019 the average price for a latte in Australia was around 3.96 Australian dollars per cup. If you buy one coffee a day, then that adds up to $19.8 a week. Assuming there are 4 weeks in a month, that’s $79.2 your spending on coffees each month. 

Bringing a coffee from home, buying coffee sachets in bulk or having instant coffee (it’s not that bad) could save you a lot in the long run. Alternatively, you could embrace water! It is good for you, it’s refreshing and the best part of it all – it’s free! What more could you ask for?

Do you remember the library? You should go there!

Do you remember that room filled with books, DVDs and computers? You probably would have had one at your school, you might have even visited one out in the wild. It’s called a library, and many towns and cities have public libraries.

Why is this good? You can rent books, DVDs, audiobooks and more from your local library and it won’t cost you anything. Most libraries will allow you to extend your rental if you don’t finish what you’re reading or watching. Some libraries don’t even have fees for returning your items late. Instead of buying a book at full price at a bookstore, or renting a movie from iTunes, so can rent it free from the library. Another perk, when you move house, you won’t have to cart kilos of books with you.

Alternatively, if you are one of those people that love to keep books when you’re finished reading them, why not try and go to a secondhand bookstore? Secondhand bookstores are becoming increasingly popular and well-stocked. Because of this, many secondhand bookstores have all the books commercial bookstores have, but often for half the price.

Go old school and get yourself a piggy bank

You might not have had a piggy bank since you were a kid, but it’s time to bring them back. A piggy bank is perfect for any loose change you might have lying around. Although annoying, those 5 cents coins can add up after a while. So instead of putting them into your local cafe’s tip jar, why not tip yourself? After a few months, you might start making real progress. You could put that spare change into your savings account, or put it towards your bills, groceries – it’s up to you!

Use fashion to help save money

Another frugal hack you could use to increase your savings is by utilising the power of fashion. How can you do this, you might ask? One savings hack is to buy clothes in neutral colours, so you don’t have to buy as many. Neutral colours go with everything, and they often aren’t the stand out of an outfit, so you can wear them multiple times without people realising it’s the same outfit.

Another thrifty hack could be to visit second-hand clothes stores before heading to the shopping centres for a new outfit. Perhaps you might find just what you need for half the price.

On the flip side, instead of donating your clothes, or throwing them in the bin, why not try and sell your clothes? Even if you get less than what you paid for, it’s still more than what you would get if you threw them out. Something is better than nothing.

Create a candle oasis – be energy conscious

You’ve probably heard this time and time again. Turning off the lights when you leave a room can save you money. Whilst that’s true, it’s not exactly enjoyable. Turning off lights when you leave the room, your air-con or heating off when you leave your house or switching appliances off at the switch are all great ways you can reduce your energy bill.

But how about taking it one step further? Turn off all of your lights and create a cosy candle oasis. This is way more fun, and also a great way to save money! You don’t have to do it all the time. You could even try it once a week, once a month – whatever you want.

Utilise cashback deals and discount codes

If you’re looking at buying something specific, it could be beneficial to look at the numerous cashback and discount websites, such as OzBargain, to see if the item is on sale anywhere, or if you can get money back on your purchases.

Want a new dress but it’s not urgent? You could wait until there’s a cashback for leading fashion brands and purchase your dress during the deal. Want a new blender? OzBargain is showing it’s on sale at Harvey Norman. Doing your research before you buy something, or choosing to buy from stores with cashback deals going could save you a decent amount of money, particularly if you do it often.

Go forth with these frugal hacks for 2021

Although January might be behind us, it’s not too late to implement some good habits and save money in the process. You could use the above 10 frugal hacks to boost your savings and set your future self up for success. It’s not as hard as you think.

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How to Report Credit Card Fraud: Protect Yourself and Your Credit Score

report credit card fraud

Fraudsters are adopting more sophisticated methods to steal your card details. Tippla has put together a guide on how to protect yourself and your finances, and, if the worst should happen, report credit card fraud.

report credit card fraud

As technology advances, you don’t need to only worry about someone stealing your credit card out of your bag. But also that your details might be stolen online. So how can you protect yourself from and report credit card fraud if you do fall victim?

What is credit card fraud?

Let’s start by going over what is credit card fraud. As outlined by Experian, credit card fraud is “when someone uses your credit card or credit account to make a purchase you didn’t authorize”.

This could happen in many ways. A thief could steal your physical credit card and use it to make purchases. Alternatively, scammers could steal your details online, such as your credit card number, PIN and security code. With these details, they can make purchases online without having your physical card. 

Types of credit card fraud

Credit card fraud comes in many shapes and sizes. Sometimes the fraud is physical, for example, they steal your credit card from your wallet, or the scam is online. This is referred to as card-not-present (CNP) fraud.

Here’s an overview of the different types of credit card fraud:

Credit card theft – when someone steals your credit card from your wallet, bag, car – wherever you keep it;

Using lost or stolen cards – say you dropped your credit card somewhere, and an opportunist picks it up. They proceed to use your card as if it was their own instead of reporting it to police;

Counterfeit cards – counterfeit credit cards are physical cards that were created with real account information that has been stolen from victims using a device called a “skimmer”. Often, the victims still have their real cards, so they’re not aware that their details have been stolen.

Intercepting and using mailed cards – when someone orders a new credit card and it’s sent to their address in the mail, fraudsters will steal this mail and use the card. Whilst credit card companies do their best to protect the cards during transit, they can be stolen from your mailbox.

Account takeover – as the name implies, account take over is when someone takes over your account. They could do this by getting your address and basic information and learn some of your security questions, such as your mother’s maiden name. Once they have this information, they’ll call up your bank or provider and change the account details. They might change the address, so a new card is sent to their address and not your own.

Fraudulent applications – using your details, such as your name, date of birth and address to apply for credit cards in your name.

CNP – card-not-present fraud is when scammers steal your details when you pay for something online. For this type of fraud, they only need basic information such as your credit card number and name to execute the fraud.

Credit card fraud in Australia

Although credit card fraud is an issue in Australia, there is an encouraging declining trend. According to figures released by the industry self-regulatory body Australian Payments Network (AusPayNet), fraud on payment card transactions dropped by 15.4% to $447.2 million for the 12 months to the 30th of June 2020. This continued the declining trend recorded in the previous year.

CNP fraud, which is when someone’s credit card details are stolen online and used in mainly online transactions, fell by 14.0% year-on-year down to $392.4 million.

Even though these figures are encouraging, that’s not to say that credit card fraud isn’t a real threat. 

Credit card fraud vs identity theft

Identity theft is a type of fraud where someone uses another’s identity to either steal money or gain some kind of benefit. Credit card fraud is a type of identity theft. This is because the scammers are using your credit card details to make purchases without your consent.

As outlined by the Australian Competition and Consumer Commission’s (ACCC) scam statistics website Scamwatch, common methods of identity theft include phishing, hacking, remote access scams, malware and ransomware, fake online profiles, document theft and data breaches.

How to tell if you’re a victim of credit card fraud

The Australian Federal Police outlines the following ways you can identify if you have been a victim of identity theft:

  • Items have appeared on your bank or credit card statements that you don’t recognise;
  • You applied for a government benefit but are told that you are already claiming;
  • You receive bills, invoices or receipts addressed to you for goods or services you haven’t asked for;
  • You have been refused a financial service, such as a credit card or a loan, despite having a good credit history;
  • A mobile phone contract has been set up in your name without your knowledge;
  • You have received letters from solicitors or debt collectors for debts that aren’t yours.

How to report credit card fraud

Credit card fraud can happen even when your card is still in your wallet. Therefore, it’s a good idea to monitor your credit account to see if there are any suspicious transactions.

If you discover there are purchases on your credit account that you haven’t authorised, then you might be a victim to credit card fraud. If that’s the case, here’s what you should do:

Alert your credit card company

The first thing you should do if you discover you’ve been subject to credit card fraud is to immediately contact the credit card company and alert them to the fraudulent activity. They should put a hold on your account so the fraudsters can’t make any more purchases, and reimburse you the money. 

Change your online passwords and PINs

Once you have alerted your credit card company or bank to the fraud, you should log into your account and change your online banking password and PIN. Password managers can help you create complex passwords that are hard for fraudsters to crack. You might want to consider using one of these to help create a strong password and prevent further fraud.

Check your credit report

Your credit report can be a valuable resource to help you detect credit card fraud and identity theft. Your credit report outlines all of the different credit accounts you have. If you check your report and see that you have credit accounts open that you never authorised, then you might be a victim of credit fraud.

If you have been a victim of fraud, then you should contact the three credit reporting agencies in Australia. These are Equifax, Experian and illion. You should report the fraud to each of these credit bureaus. You can ask them to place a ban on your consumer credit information.

Placing a ban on your consumer credit information can help prevent fraudsters opening accounts in your name. During the time the ban is in place, credit providers won’t be able to view your credit report without your written permission. Credit providers can’t open up an account without viewing your report.

You can also add a fraud alert to your credit report with each of the agencies. This means you will receive a notification when certain changes happen to your credit file.

Report credit card fraud to the police

If you are a victim of fraud, you should report credit card fraud to the police. If your details have been stolen online, you can report the fraud via ReportCyber on their website here. You can also call the following number: 1300 292 371.

How to protect yourself from credit card fraud

As the saying goes, prevention is better than cure. Here are some things you could do to protect yourself from falling victim to credit card fraud.

Keep your wallet or purse secure at all times

Whilst online scams are a real threat, thieves can still steal your credit card from out of your bag. When out in public, you should keep your wallet or purse secure at all times to stop it from being stolen.

Shred financial documents before putting them in the bin

The Australian Federal Police recommends shredding any personal or financial papers before you throw them away, so people can’t access your details. Alternatively, you should keep them in a secure place if you want to retain them.

Be careful when using your card

When you’re out in public, you should always cover the keypad at ATMs, to stop strangers from viewing your pin. The same goes for when you’re entering your pin on EFTPOS terminals.

You should also be aware of your surroundings and keep an eye out for anyone trying to watch you. Sometimes, scammers might try and attach technology to the ATM or EFTPOS terminal to scan your details. You should look out for any strange or loose fixtures attached.

For extra protection, you can ask your bank or financial institution for a credit or debit card with an embedded microchip. These are more secure than cards that only have magnetic stripes.

Be mindful of where you provide your details

When you’re shopping online, you should be mindful of where you provide your details. You should only buy from reputable companies or from ones whose security measures you can verify.

One method you can do is look at the company’s web address. With the https the “s” indicates that the site is secure.

On the other side of this, if you’re using a public computer, such as an internet cafe, or using an unsecured wireless connection (AKA a hotspot), avoid doing your internet banking or making payments.

Furthermore, you should be cautious of who you provide your personal and financial information to – both online and offline. 

How can credit card fraud hurt your credit score?

Your credit report details all of your current credit accounts, as well as any credit you’ve had over the past two years. The impact fraud will have on your credit score, however, depends on what the scammer does with your details.

If they max out your credit card, this will hurt your credit score, as it indicates that you’re not responsible with your finances. If they make multiple applications in your name, this could also harm your rating.

However, it is important to highlight that although credit card fraud can hurt your credit score initially, once you alert the credit reporting agencies to the fraud, they will remove the fraudulent accounts or transactions and your credit score will revert to what it was.

Keep a watchful eye

Although credit card fraud might be on the decline in Australia, it remains a real threat for Aussies across the country. Even if you do all of the right things you could still become a victim to fraud. Constantly checking your accounts, prioritising your online security and knowing how to report credit card fraud could help you reduce the damage if your details are stolen.

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How To Pick The Right Loan For You: A Quick Guide

Are you currently looking for a loan, but you’re not sure where to start? You’re not alone! Here’s a helpful guide to get you started.

When it comes to the world of finance, you’re not alone if you feel a bit lost. Nowadays there are so many types of loans and finance options, you can be forgiven if you’re not sure which loan you should apply for. Today, we’re answering the question: how to pick the right loan for you.

Before you apply for a loan

Before you apply for a loan, one of the most important things you should check is whether you can afford the repayments. Depending on your loan type, this will usually be a fixed weekly, fortnightly or monthly cost. If you’re getting a loan, whatever the purpose, it should not put you in financial strain. If you’re unsure of whether you can afford to take on a loan, you could reach out to a financial counsellor.

Below are some more things you should consider before you apply for a loan or some kind of finance.

Identify your purpose

Before you take on a loan, it’s important to know why you need money. Do you need a loan to cover unexpected expenses, help out with the bills, make a big purchase, study, buy a house, buy a car? The options are endless.

Once you’ve identified why you need a loan, then it can narrow down your search significantly. If you’re wanting to buy a house, then you’re in the market for a home loan. If you want to buy something personal or cover unexpected expenses, then that would be a personal loan.

Know your loan options

In Australia, there are so many different types of loan options, and companies willing to offer Aussies finance. Before you jump in headfirst and apply for a loan, it is worth knowing all of your options.

Here’s a list of some of the different types of loan options:

  • Personal loans
  • Mortgages
  • Car loans
  • Debt consolidation loans
  • Student loans
  • Business loans
  • Home equity loans

Personal Loans 

Personal loans come in many forms and can be used for multiple purposes. As the name implies, personal loans are used for personal expenses. Perhaps you need to cover unexpected costs, you want to improve your home, the list is endless.

Whilst personal loans are generally easier to get than other loans, you still have to sign a loan agreement. For this loan type, there are two main forms of personal loans – unsecured and secured.

Mortgages 

A mortgage is a form of personal loan that is secured against the property you buy with it. A bank or credit union will approve a loan with set repayments plus interest over a longer period of time. Home loans are usually set for 30 years. 

There are two main types of mortgages – a fixed-rate mortgage and a flexible rate mortgage. A fixed-rate mortgage is when the interest rate is fixed for a select period of time, usually 1 year. A flexible rate mortgage means that the interest rate is flexible and will change throughout the lifetime of your mortgage.

Car Loans 

Car loans are a specific form of a personal loan to buy a car. Often, this loan isn’t paid out directly to you. Instead, they can be paid to the dealership that you closed your car deal with. 

In most cases, a car loan is secured against the car you are purchasing. This can help you to get a lower interest rate and better loan terms. However, if you can’t make your repayments, you are at risk of losing your car. 

Debt Consolidation Loan 

If you have accumulated debt from multiple sources, you may consider consolidating your debt into one loan. A debt consolidation loan combines all your current debts into one single debt with one interest rate and one repayment date. You may be able to get an overall better interest rate and save some money along the way. 

Whether a debt consolidation loan is right for you completely depends on your existing credit terms and conditions. In some instances, consolidating your debt could mean that you are paying higher interest rates, which means you’ll end up paying more in the long-term. You might also incur extra fees (establishment fees, fees for paying off your other debt early, etc). This is something to watch out for.

Student Loans 

Student loans often come with low-interest rates and can be considered an investment in your future. They often come with long loan terms and smaller repayment amounts over a longer duration. 

Business Loans 

A business loan is a form of loan given to help with business operations. This could be linked to a specific purchase or to provide cash flow in the first years of operation until the business is making a profit. Business loans are often big amounts of money linked to a business plan. They may be secured against assets or your business itself.

Home Equity Loans 

Even while you are still paying for your home, you can make use of its value by taking on a so-called equity loan. The value of your property that you have already repaid can be used to take on new credit. Because it is secured against your property, home equity loans come with lower interest rates and provide good security to creditors. 

Compare loans

Now that you know why you want a loan, and what’s available, it’s a good idea to compare all your options. If you’re looking for a personal loan, then you could look at several options and try and find the one with the best terms for your situation.

If you want to limit the negative impact on your credit score, then you should try and not apply for too many loans. This is because, when you apply for a loan, the lender will take a look at your credit score, to see how risky of a borrower you are. This check is recorded on your credit report as a hard enquiry and it will usually impact your credit score.

As outlined by Equifax, “Hard inquiries serve as a timeline of when you have applied for new credit and may stay on your credit report for two years, although they typically only affect your credit scores for one year.”

Because of this, you could protect your credit score by doing your research first and compare loans to find the best one for you.

Know your credit score

As a follow on, it’s important to know what your credit score is. If you have a good credit score, then you could get access to better loan terms, such as lower interest rates, as your credit score indicates to lenders that you are a low-risk borrower and likely to make your repayments.

If you know your credit score isn’t good, then it might be worth taking the time to improve your credit score before applying for a loan. Not only could a good credit score be the difference between being rejected or accepted for a loan, but it could save you money in the long run.

One of the first things you should do if you want to improve your credit score is to check your credit report for any mistakes. 1 in 5 credit reports in Australia have some kind of mistake on them, and that mistake could be hurting your credit score!

As we highlighted in a recent article, there are numerous ways you can repair your credit report and fix your credit score. Want to hear some good news? Fixing your credit score is free, and you can do it yourself.

How to pick the right loan

With so many loan options out there, it can be hard to know how to apply for the right loan for you. If you can identify why you’re getting a loan and compare your options before applying for a loan, then you could be setting yourself up for a more successful experience, and save your credit score and bank account from unnecessary harm.

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Credit Repair Companies: Are They Worth It?

In life, there’s rarely a quick fix. The same can be said for your credit score. You should be wary of any credit repair company promising to fix your credit score in a short amount of time.

If you have found a mistake or an issue on your credit report, you might be trying to find out how to repair your credit report and, as a result, improve your credit score. During your search for answers, you may have come across credit repair companies. But what are credit repair companies and are they worth it?

Credit repair companies often promise to fix your credit score by fixing issues on your credit report for a fee. They usually promise fast results and high approval rates. Whilst this might seem like a great deal, unfortunately, the age-old saying comes into play here – if it sounds too good to be true, it probably is.

Credit repair companies in Australia

In Australia, there are a number of companies promising fast credit report repair or guarantee to fix your credit score in no time at all. However, we’re here to let you in on a secret – most of the quick fixes these companies promise to do are actually things you could do yourself, and for no cost whatsoever. 

In some instances, however, there might not be a way to fix your credit score overnight. But, that doesn’t mean it can’t be done! As the saying goes, good things take time.

Should you use a credit repair company?

The tricks credit repair companies use to improve your credit report, are actually things that you can do yourself, and for free! So whilst a credit repair company might be able to improve your credit score and repair your credit report, you’re most likely just paying someone to do something you could do for yourself!

In the end, it’s always up to you. But, we’ve put together a short guide on how you can repair your credit report for free!

How to repair your credit report

Your credit score is an important number. It can be the difference between you being approved or rejected for a loan, a rental apartment, utilities and more. Your credit score is a 4-digit number ranging from 0 to 1,200. This number is based on your credit report which details information on your credit history – your credit accounts, credit applications, repayment history, defaults and more.

If you have a below-average credit score, then it might affect the loans and credit you apply for. Not only could a poor credit score result in you being rejected for finance, but it could also mean that you only have access to loans with higher interest rates and fees, which will cost you more in the long run!

1 in 5 credit reports contain some kind of mistake on them. These mistakes can damage your score. In Australia, you have a right to get any mistakes on your report fixed for free, and this is something you can do yourself.

Common mistakes on your credit report

Now you know that you can actually fix mistakes on your credit report for free, let’s take a look at some of the most common mistakes Aussies find on their credit reports.

Generally speaking, there are two types of mistakes made – those made by the credit reporting agency, which in Australia is either Equifax, Experian or Illion, or mistakes made by the credit provider. Your credit provider might be the company you have taken out a loan with, the bank that provided you with a credit card, or the financial institutions you applied for finance with.

When it comes to the credit reporting agencies, most often, they might have recorded your information incorrectly on your report, such as your name, date of birth or address. Furthermore, you might find that your debt – ie. a loan or credit card limit, has been listed more than once, or the amount of the debt is wrong.

When it comes to errors made by the credit provider, the Australian Securities and Investments Commission’s (ASIC) Moneysmart, highlights the following common mistakes:

  • Incorrectly listed that a payment of $150 or more was overdue by 60 days or more;
  • Did not notify you about an unpaid debt;
  • Listed a default (an overdue debt) while you were in dispute about it;
  • Didn’t show that they had agreed to put a payment plan in place or change the contract terms;
  • Created an account by mistake or as a result of identity theft.

How to fix mistakes on your credit report

If you’ve taken a look at your credit report and you’ve spotted a mistake, what should you do next? If the change is about your personal information rather than about enquiries or accounts, then it’s likely a mistake from the credit reporting agency. You can directly contact your credit bureau and request a change. 

If the mistake is regarding accounts or enquiries, you can contact your credit provider directly and ask them to change the entry. After investigating, the credit provider will then report back to the credit bureau and the change will become visible on your report. 

If you can’t resolve the issue, you can contact a free financial counsellor to mitigate, or directly reach out to the Australian Financial Complaints Authority (AFCA). However, you should try and solve this on your own terms first. 

Improve your credit score

If your poor credit score hasn’t been caused by an error on your credit report, never fear! There are still plenty of other ways you can improve your credit score. We recently put together a quick guide to help you fix your credit score.

Before we give you tips on how to improve your credit score, it’s important to understand what goes onto your credit report and how long certain events stay on your report.

  • Credit accounts – any open credit accounts and accounts that have been closed in the past two years
  • Credit enquiries –  5 years 
  • Repayment history – for 2 years 
  • Defaults – 5 years 
  • Court judgements – 5 years
  • Bankruptcies – at least 5 years 
  • Serious credit infringements – 7 years 

Watch your credit applications

You might not realise it, but making multiple applications for credit, such as applying for multiple loans at once, can be damaging to your credit score. This is because each time you apply for credit the company you have applied to will check your credit report to see how risky of a borrower you are. This check registers as a hard enquiry on your credit report and can harm your credit score for a period of time. The more applications you make, the more damage you’ll do to your credit rating. 

Not only will multiple hard enquiries lower your credit score, it could also lead to you being rejected for a loan or other types of credit. Think of it from the perspective of a lender. You’ve just applied for a loan and they want to see if you’re a risky borrower. They check your credit score and see you’ve applied for multiple loans all at the same time. This could imply to them that you’re in financial distress, which means, you’re more of a risk. As a result, the lender could reject your application or provide you with the loan with a higher interest rate and fees – which will cost you.

Make your repayments on time

Your repayment history has a lot of weight when it comes to your credit score. This is because your rating is based on how well you can manage your debt. If you consistently pay your bills and make your credit repayments on time, then this is a clear demonstration that you are responsible with your debt, and therefore, a reliable borrower.

Let your credit accounts get old

This might seem strange at a first glance, but the age of your credit account can contribute positively to your credit score. The older the account, the better it is for your rating, as it demonstrates that you can consistently handle a line of credit.

Another way you can improve your credit score is by keeping your credit accounts open. Whilst we’re not advocating that you keep multiple credit accounts open just for the sake of it, you might want to consider keeping some open and in use so credit reporting agencies have data to base your credit score on.

Credit repair companies: are they worth it?

If you’re wanting to repair your credit report and fix your credit score, then this is generally something you can do yourself for no cost whatsoever. Because of this, whilst credit repair companies might be able to help you, anything that these companies are promising to do, are also things you could do yourself.

At the end of the day, the decision is yours. But it’s good to have all of the information on hand so you can make an informed decision. If you’re ever unsure, you can reach out to a free financial counsellor who can help you make the best decisions for your current situation.