Peer to Peer Lending for Dummies
Peer to Peer Lending For Dummies – OurMoneyMarket
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This information has been prepared as general information only without taking account the objectives, financial situation or needs of individuals. All investors should seek their own financial, legal and taxation advice relative to their own circumstances before making an investment.
A couple of months ago I wrote an article outlining the 3 Big Mistakes You Make That Stop You Getting a Loan. The article highlighted a number of common mistakes you make that negatively impact your credit score. Today’s article highlights 5 Simple Ways to Improve Your Credit Score, so you can obtain the loan you need or the interest rate you deserve.
#1 Check Your Credit File for Errors
An estimated 30% of credit files in Australia contain errors in them. Removing errors in your credit file can be an easy way to improving your credit score. Some common mistakes include:
More serious errors to look out for include:
Removing these errors from your credit file can go a long way to significantly improving your credit score.
You can obtain a free copy of your credit file from Equifax.com.au.
Note: Look out for lenders that make additional credit enquiries for slight variations in your loan application. They may do this despite making an enquiry only the day before. To avoid the risk of duplicate credit enquiries always ask your lender if your credit variation or credit increase will result in a further credit enquiry.
#2 Start Building a Credit Story
The age and diversity of your credit file is an important factor in determining your credit score. For those that have never had a credit contract in their name, consider opening a basic credit account as soon as possible (e.g. a mobile phone contract). For those of us who have an existing credit record, check that your name is on all credit contracts you’re paying for – there may be an old mobile phone contract that’s still recorded under your parents’ names that you should get the benefit of!
In addition to this, having a variety of credit contract types (e.g. a home loan, mobile contract, credit card and/or personal loan) can help improve your credit score in the long run. Obviously, the key is to making sure you manage all these credit accounts responsibly, and making sure that when applying you comply with point #3 below.
#3 Stop Making ‘Bulk’ Loan Applications
Don’t make multiple credit applications across different lenders during a short period of time. It is one of the worst things you can do for your credit score. To the credit bureaus this looks like you lack financial control or are financially desperate. Stopping this behaviour is a great way to improve your credit score.
Always do your research before applying for credit and, if possible, get an early indication from the lender on whether you will be approved for the credit amount you need. For example, with OurMoneyMarket you can obtain a rate quote for a personal loan in minutes, without it impacting your credit score. We’ll also test whether you meet our eligibility criteria so you’ll know if you have a good chance of getting a loan before you proceed.
#4 Take a Break from Applying for Credit
Time heals all wounds. This has never been truer when it comes to improving your credit score. Taking a break from applying for credit will improve your credit score, especially if you have a track record of making multiple applications during a short period of time.
Now, for those that need credit to make a purchase or consolidate debt, this is understandably not a solution, however for those that are frequently seduced by the latest credit card promotions, maybe think twice about whether it is worthwhile in the long run.
#5 Make Payments on Time
It sounds simple, but ensuring all your financial commitments are paid on time is a perfect way to improving your credit score. An easy solution to managing your payments is to establish direct debit arrangements for all your credit contracts.
If you’re finding your existing debt repayments too difficult to manage, consider consolidating your debts into one easy to manage personal loan. You can obtain a free rate quote here.
Summary
Understanding how credit scores work can get a bit confusing at times, especially when the best methods to use in order to improve your credit score can appear contradictory. So what are our tips in a nutshell? In short, check your file at least annually for errors, put in place methods to ensure you make all your payments on time and when applying for credit wait for the lender to respond before going elsewhere, or preferably, apply with lenders that offer you a pre-approval process that won’t impact your credit score.
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5 Simple Ways to Improve Your Credit Score – Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.
Top 5 Ways to Make Easy Cash – Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.
So, you’re looking for ways to make a few extra dollars. I’ve been there! When I quit my job to start OurMoneyMarket I was in need of some extra cash to get by. The tasks/jobs I was looking for didn’t have to pay much, but they had to meet at least one of the following: (i) the job had to be easy; (ii) the job need to be quick; or (iii) I could do the job at a time convenient to me.
Luckily, I found enough jobs to make me, on average, an extra $200 a week. That’s an extra $10,400 a year!
So, without further delay, here are my top 5 ways to make easy cash – not become a millionaire cash, but easy extra cash:
#1 Easy Cash With Mystery Shopper
Task Difficultly Rating: EasyCash Reward Rating: 4/5
Oh, Mystery Shopper, how good you were to me. With Mystery Shopper, there are all kinds of jobs you can do, and you get to pick the jobs you want. Some of the jobs I did included:
It took me, on average, around 30 minutes to complete any given task and complete the service report you must submit.
#2 Airtasker
Task Difficultly Rating: Easy to HardCash Reward Rating: 5/5
Airtasker is an online peer-to-peer website that allows people to post any kind of task or job they need completed, and whether they need it done online or in person.
With Airtasker, you can make money doing all kinds of things (e.g. writing blogs, helping someone with their resume, wait in line for the next iPhone, caring for puppies, you name it!). Generally, you stand to make between $20-$400 for tasks advertised on Airtasker.
#3 Online Surveys
Task Difficultly Rating: EasyCash Reward Rating: 1/5
OK, so I never really did these surveys properly, but I think that’s justified given they seem to falsely advertise the time each survey takes.
Basically, with sites like, Valued Opinions, you can complete surveys that take anywhere between 5 to 60 minutes, and earn between $1 to $20 for your time.
It’s not exciting money, but it’s really easy and you can do it just before bed, or during T.V ad breaks.
#4 Sell Clothes & Furniture Online
Task Difficultly Rating: EasyCash Reward Rating: 5/5
Selling your old clothes, furniture etc. online is a great way to make extra cash. It also removes clutter…and will make those you’re living with super happy.
To be honest I didn’t make regular money from this (sold a couch once for ~$1,000). However, friends of mine have regularly sold their old clothes on eBay and Gumtree and claimed to make good cash doing this.
#5 Search the Web
Task Difficultly Rating: EasyCash Reward Rating: 3/5
Sometimes saving cash on everyday expenses is as good as earning cash. Simply add PricePal to your web browser and get notified of discounts when shopping at some of your favourite retailers!
Due to this little beauty, I regularly received around $20 a week in cash back when I shopped at Woolworths. Friends of mine would save up to 6% when shopping at UNIQLO, Cotton On, Asos.com, etc.
Honourable Mentions
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This information has been prepared as general information only without taking account the objectives, financial situation or needs of individuals. All investors should seek their own financial, legal and taxation advice relative to their own circumstances before making an investment.
Before jumping into the 3 big mistakes you’re making that can impact your chances of obtaining a loan. I have a few questions.
Do you know what your credit score is?
If you don’t know what your credit score is it’s worthwhile finding out. You can do this for free via Credit Savvy, Credit Simple and Get Credit Score. Forewarning, by obtaining your credit score from these websites you can expect to receive emails offering you credit (not from us, as we don’t have any affiliation with them, but from our competitors).
So, what is a credit score?
In short, it is a number that represents your “creditworthiness” and provides an indication to lenders of the likelihood of something “bad” happening on your credit file in the next 12 months (e.g. bankruptcy, consumer and commercial defaults etc.). A diagram of Equifax’s credit scores and what they generally mean in terms of credit quality is below.
With Equifax (previously Veda) your score can range from -200 to 1200. The higher the score the better, for example, a score of 600 means there is a 5.88% chance that something “bad” will happen on your file in the next 12 months.
What do you think your score is?
I guessed mine would be at least around 750 (i.e. “Very Good”). I’ve never defaulted on any loan, I’ve never missed a payment, though as I’m relatively young I figured the “age” of my credit file might go against me (i.e. not much data to draw on). Well I was wrong. My credit score is 518 (i.e. “Average”) …Ouch! So how did this happen?
Well I made the same mistakes a lot of people make. Here are 3 common mistakes that impact your credit score and your ability to get a loan or the interest rate you deserve.
#1 Don’t Get Sucked into New Credit Card’s Unless You Really Need It
This was my downfall. Oh, the glory of 50,000 frequent flyer points for just signing up to a new credit card with ABC Bank – “I’ll just get a few of these bad boys and my dream holiday to Argentina will be sorted”. Sadly, each time you make a credit enquiry it impacts your credit score. Below is what happened to me the last time I opened up a new credit card:
• Credit Score Prior to Credit Card Enquiry = 554
• Credit Score After Credit Card Enquiry = 518
My score dropped 36 points! Suggesting that I was now 2% more likely to have a “bad” event occur on my credit file in the next 12 months.
Now I did this quite a few times over a couple of years (flights to Argentina are expensive and points aren’t worth what they used to be), and I know I’m not alone in doing so. It does seem unfair. My behaviour as a borrower didn’t change. I always honour my commitments. I didn’t even need the credit card. To the credit bureau’s however, the pattern of my enquiries suggested desperation and I was penalised for it.
So what do you do if you actually need a credit card or personal loan, but are worried about the enquiries impacting your credit score? Check whether the lender has a “pre-approval” process. For example, with OurMoneyMarket you can obtain a rate quote for a personal loan in minutes, without it impacting your credit score! We’ll also test whether you meet our eligibility criteria too so you’ll know if you have a good chance of getting a loan before you proceed.
#2 Avoid Payday Lenders If You Can
So not only do enquiries impact your credit score, but the type of enquiry also impacts it too. This is particularly the case when making an enquiry with a ‘Payday’ lender, but also applies for credit cards.
What is a payday lender?
A payday lender typically provides loans of up to $2,000 with repayment terms between 16 days to 1 year. They will often charge interest rates in excess of 45% (sometimes in the hundreds), promise you quick cash within an hour and from time to time can be seen in advertisements dressed as bunnies or wizards!
Sadly, we’ve seen some good borrowers badly impacted by payday loan enquiries, which prevented them from accessing credit 12-24 months later. Unfortunately, these borrowers had no idea the ‘Payday’ lender was considered “high-risk” by the credit bureaus. So, please check the terms and conditions before applying for a loan. If the interest rate is 45%+ or is for an amount less than $2,001, then there’s a good chance its considered ‘Payday’.
#3 Don’t Let Your Broker Run Wild
There are many people who have had great experiences with brokers, however sometimes it can go horribly wrong. Please keep a check on your broker and don’t let them “shop you around” to lenders, as all these enquiries will negatively impact your credit score and just make things worse.
In the case of home loans, Mortgage Managers are hard to come by, but companies such as Mortgage Direct, make it their business of knowing the “in’s and out’s” of lender’s credit policies when it comes to home loans. They can be helpful in giving you an indication of whether your home loan will be approved without impacting your credit score.Can I Fix My Credit Score?
Yes, you can. However, we’ll explore this in detail in a future article.
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The information contained in this article should not be taken as financial product advice and has been prepared as general information only, without taking into consideration your personal investment objectives, financial circumstances or needs. In particular, you should pay careful consideration to the risks outlined in the OurMoneyMarket PDS, available here.
4 Ways to Save Money and Earn Extra Cash at Your Bank
I often see articles (typically from banks) giving tips on how to save money or how to budget. These articles include tips like “monitor your expenses”, “set savings goals” or “create shopping lists before you shop”. These are obviously good practices for saving money and budgeting, but they often involve you buying a box meal at Aldi instead of ordering a pizza on a Friday night. This stuff you already know and are typically the things you enjoy spending money on. So, how can you save money on the things you hate spending money on? And how can you earn some extra cash at your bank?
Here’s 4 simple ways to save money and/or earn some extra cash at your bank.
#1 Pay Less on Your Home Loan
Go to a loan comparison site (e.g. Finder and RateCity) and take note of the lowest home loan rate available. Then, contact your bank’s customer service line and ask for a payout figure on your loan. Explain that you’re planning to move to another finance company as they’re offering you a better rate. Your bank will immediately put you through to the Retentions Team who will discuss what rate you’re being offered, so they can see if they can compete. The Retentions Team will likely offer you a slightly higher interest rate than what you’re able to get elsewhere as they know there are some costs to you moving banks (let alone the effort and admin). If they offer you a lower rate great! You probably just saved enough money for your next holiday.
Please note, if you currently have a fixed rate home loan it will be harder to negotiate a lower rate on your home loan as there are break costs involved in refinancing these loans.
#2 Avoid Paying Annual Fees on Your Credit Card
Banks can refund the annual fee on your credit card as long as you contact them within 45 – 60 days of it being charged to your account. Steps to take: (1) Ask for the Credit Card Cancellation team; (2) Advise the customer service rep. that you use the card for day-to-day transactions but would like to cancel the card as you don’t wish to pay the annual fee; (3) They should offer to waive the fee. If they don’t offer to waive the fee and you don’t want to cancel the card, simply don’t proceed with the cancellation. Note, if you’re annual fee is greater than $150 you may only be able to negotiate a 50% reduction on your annual fee.
#3 Boost Your Savings by Regularly Opening New Savings Accounts
The banks are always keen to get hold of your savings, as it’s a cheap source of funding for them. Your bank will regularly offer bonus interest on new savings accounts in order to attract new customers. They won’t advise existing customers of these deals but you can also take them up. What’s the catch? The bonus interest is only available for a fixed period (e.g. 4 months), after which it converts to the standard low variable base rate (these days around 1%-2%), so at the end of the fixed “honeymoon” period just open up another account and get back on the bonus interest rate offer!
#4 Avoid Hidden Fees on Loans & Bank Accounts
Firstly, companies are notorious for charging monthly account keeping fees. Most people just ignore these costs as they seem so insignificant at the time, however, these costs add up to a lot over the life of a loan. The average monthly service fee on bank personal loans is $10 (as if they were paying someone to manually handle your account each day!). For a loan term of 7 years this will cost you an extra $840! You know that feeling when money seems to just disappear from your account, and you don’t know how, well this could be one of those reasons.
Secondly, banks have historically enjoyed charging prepayment fees and early exit fees (i.e. they want to charge you extra if you want to pay off your account early!). Borrower’s take note: your circumstances will likely change over the next 7 years. That promotion you’ve been working hard to get from your boss for the last 12 months will happen, and you don’t want to be stuck paying interest on a loan you no longer need once you receive your pay rise. To avoid these costs consider refinancing your loan (home loan or personal loan) to a provider that offers no monthly service fee, no prepayment fees and no early exit fees. This means you will know all your costs upfront, you won’t be locked into a loan you may longer need, or can pay off sooner, and you will find it easier to budget moving forward.