How one small mistake can cost you a home loan

Did you know that just one forgotten electricity bill or unpaid mobile phone invoice could make or break your home loan application?

Did you also know that an unpaid bill of just $100 or more can smear your credit file for up to seven years?

The fact is, it doesn’t take much for your credit file to end up with a black mark against it.

Mortgage brokers meet with would-be borrowers on a daily basis who are shocked to learn that their credit file holds details that could see their home loan application declined.

Many of them are unaware that certain aspects of the debt history, such as bill defaults and applications for loans and credit cards, are on file and are made available to lenders and other credit providers.

There is a lack of knowledge about the existence of individual credit files which, through only one or two debt-related mistakes like a missed or late bill payment, are often enough to have a home loan denied.

Younger borrowers are especially likely not to understand the importance of keeping their credit file ‘clean’. Defaults and credit applications are usually displayed loud and clear to lenders researching a potential customer’s suitability for the ability to repay a home loan.

Borrowers need to be aware that if you have been active in applying for credit within the last five years – such as credit cards, store cards, personal loans and mobile phone contracts – then all of this information will be stored on your credit file.

If you have not met deadlines with bills or other debt payments in that time, then that will also be kept on file for five to seven years.

The good news is that defaults are preventable in many cases.

If you are unable to meet repayments it is up to you to contact your lender or credit provider and make arrangements to pay the outstanding balance, before a default is noted on your credit.

Follow the five tips below for keeping your credit clean:

 1. Pay on time

Pay your credit cards, bills and personal loans before the due date. Keep utility bills on the top of your ‘to do’ pile and file them after paying, to be sure you don’t fall behind.

2. Automate.

Missed and late payments are one of the most common defaults on a credit file, so a good way to ensure you don’t miss one is to set up automatic transfers from your savings account

3. Just say ‘No’

Credit providers may tempt you to increase your limit. Resist unless it is absolutely necessary. Don’t increase just because you can.

4. Don’t go overboard

It’s easy to go over your credit limit and lose track of spending, which is when defaults are more likely to appear on your credit file. Make sure you have a budget and stick to it.

5. Pay more than the minimum

Only repaying the minimum never pays off: you’ll be in debt for years and you’ll spend thousands in unnecessary interest. Making repayments above the minimum amount will help you work towards paying off your balance and avoiding tarnishing your credit file.

You can order a free copy of your credit file by clicking here.

Source: www.yourmortgage.com.au

A life less frantic

We are masters at packing plenty of activity into our daily lives. And consequently, our lives are frantic as we juggle the demands of “getting things done” within the 24 hours each day allows. It’s a constant battle.

But no one can survive this frantic pace purely on adrenalin, no matter how exciting, challenging or stimulating their life may be.

Mastery of time is an essential ingredient to achieving a sense of wellbeing and balance. If we do not learn to master time then inevitably, it masters us.

The consequences of poor time management

With Australians now working longer hours and taking less annual leave than most developed nations it’s no wonder our rates of heart disease, obesity, fatigue and stress are also increasing. These outcomes, in turn, have led to substance abuse, sleeplessness and a growing drug dependency as we ‘work ourselves sick’.

The Japanese have a word for this malaise – “karoshi” meaning “death by overwork”. A study of Japanese workers found that more than two thirds of those who died from heart attacks had worked excessively in the period before their attack.

Strategies to reclaim balance

What can we do about better managing our frantic lives? Here are some strategies to help:

The ‘focus’ strategy 
The ‘Focus’ Strategy relies on our ability to prioritise what’s important in our lives. It follows three simple steps:

Step 1 – Define what’s important 
– these are the longer-term ambitions and aspirations that drive your life. They should be attended to every day; making small investments regularly will better contribute to a meaningful life. But because we become overwhelmed with matters that demand “urgent” attention we sometimes postpone these less urgent but more important issues .

Step 2 – Prioritise what’s important 
– setting priorities helps us to navigate the constant choices and changes we experience. Priorities also help us to “unbundle” and unburden unnecessary activities, especially the demands of others.

Step 3 – Action Your Priorities 
– make sure you change your behaviours to align with your priorities. At first you’ll find it difficult to adapt, but if you stick to a plan it will soon become your natural mode of operation. You’ll benefit from a new found focus and you’ll be spending your precious time on what’s important to you.

A well-known Buddhist teaching is this – if you want to fill a beaker with rocks and sand then it is best if you place the rocks in first. The rocks represent our priorities, or what’s most important to us, and the sand represents everything else.

The ‘control’ strategy 
Many people think of stress as a loss of a sense of control over life’s challenges. Coping is central to controlling the way we respond to life and there are five disciplines that can work very effectively to assist:

Rule 1 – plan ‘block-out’ time in your day. 
‘Block-out’ time blocks out other people and activities and allows you some important space to think. Use this time to consider new challenges and issues (before they get out of control) and to plan your actions. Don’t use this time as a reserve for others – it’s your time, use it wisely.

Rule 2 – control the ‘incoming’. 
In war-time, ‘incoming’ often meant bombs; these days it means phone calls and emails. They can be just as disruptive because others control their arrival. So exercise your control and turn them off for periods where you don’t want to be interrupted.
Meal times are a great start. You may find this difficult, but it’s OK, you’re allowed to turn off the phone during meals! And you’ll love the freedom and sense of power it will give you.

Rule 3 – master one thing at a time. 
It’s tempting to do several things at once but that’s the trap of the frantic life. So when you sit down to read a report, finish it; when you take time for a coffee, enjoy the moment without distraction; and when you walk the dogs, get rid of the walkman and phone and absorb your surroundings.

Rule 4 – find simple pleasures. 
Our lives have increasingly relied on ‘retail therapy’ and commercial stimulation for relaxation. Yet we are surrounded with life’s simple pleasures that thankfully come at no price. For example, try a family picnic instead of a restaurant; a walk in the park with a loved one instead of an hour at the gym; or an afternoon with the music collection instead of at the movies. Simple pleasures give us control and time to enjoy ourselves and escape from our complicated lives.

Rule 5 – Say “no” more often. 
Have you noticed that successful people always seem to have more time to do things well? That’s because they plan their time to achieve balance and they focus their energies on what’s important. Don’t overload your life just to please others. Map out your priorities for time and allow plenty of space in your days.

The ‘relaxation response’ strategy 
The well documented ‘relaxation response’ (see especially “The Relaxation Response” by Dr. Herbert Benson of the Harvard Medical School) can help to clear away mental clutter and improve your ability to concentrate, so that your performance and skills in such areas as solving problems may improve.

The relaxation response, based on simple breathing techniques, is one safe and tested way to open our valves and release their pressure. But it takes time to re-train the body to achieve the desired response. Over time, a heightened sense of calm from relaxation will extend throughout the day and helps to protect us from the inevitable and unexpected stress factors in our lives.

The two components to perfecting the relaxation response are:

• Deep breathing – practise breathing deeply using your diaphragm for 10 minutes twice a day. Slowly inhale and hold your breath for 30 seconds. Slowly exhale and relax. Repeat this procedure and stay focused on how your body responds. The deeper your concentration, the better the relaxation response.
• Progressive Muscle Relaxation – lie on the floor, in a comfortable position and relax completely for one minute. Now tense all muscles in your head and neck and hold the tension for ten seconds, then gradually relax the tension until your head and neck are perfectly relaxed. Repeat this procedure once or twice for each major muscle group moving from head to feet. At the completion of the process, lie still and concentrate on the sense of relaxation of all muscles. This procedure re-trains your body to relax, over time, and reinforces the automated relaxation response you want, longer-term.

Time is a precious asset that we should use wisely to our benefit. The key strategy is to secure your own sense of control over your time and convert to a “life less frantic”, a life with less stress and more meaning.

Source: www.ipac.com

A personal road map - Part 2

2. You are your own best investment

These days, many people ask, “What can I do to protect myself from possible inflation?”

The short and quick answer: Be great at what you do. If you’re the best builder, accountant, mechanic, engineer, teacher, or dentist in town, you’ll do just fine. The key here is to become a lifelong learner. Two ways to instil this in your kids:

• Read about and research stuff you love. It could be trucks or toads, video games or televisions. My 8-year-old daughter just taught me that hares have longer legs and ears that rabbits, and she was excited to learn it. The best way to light a fire is to actually experience and learn about things that kids are interested in. The best gift you can give someone is the love of learning. That curiosity can lay the foundation to a world-class education.
• Learn to love maths. The most difficult problems tend to be multidisciplinary, and they typically aren’t solved quickly. It’s more important for younger children to emphasise spending 30 minutes on a single problem than doing 30 easy problems in 30 minutes. Of course, there’s value in repetition as well, but we’ve created a society of instant-gratification-seekers. Maths teaches us to be patient, organise our thoughts, and think logically.

3. Build a self-reflective portfolio

We don’t come predisposed to be great investors. We have all kinds of psychological baggage that prevents us from earning great returns. In short, we form conclusions prematurely, and we’re overconfident in our own abilities, prone to action in times of stress and fear, and often unable to correctly recall past behaviour — let alone learn from our mistakes.

To counteract these flaws, here are my simple rules to guide your investment decisions:

• Be patient. Don’t buy any shares spontaneously. Wait at least one month before making a purchase. Only buy one-third of what a full position would be. This allows you to average into great businesses. It also nullifies your emotional impulses.
• Be committed. Hold every share you buy for at least two years before you sell. This commitment will likely cause you to carefully consider and research each purchase, instead of buying that hot cocktail-party tip you got from Uncle Les.
• Portfolio DNA. I should know something about you when I look at your portfolio. A great place to start looking for investments is to analyse where you choose to spend your discretionary dollars.

 4. Find something you love doing, and master it

A common adage holds that it takes four hours a day, seven days a week, for 10 years to become great at something, to achieve mastery at it — and that assumes you actually spend those hours wisely, get feedback, and track your performance.

If you’re doing something you don’t love, you’re swimming against the tide. Find something you care about and do it. Work for the best, and don’t settle for anything less.

Work for free if you have to. The most important part is that you surround yourself with those who are great at what you want to become great at. As they say, it’s hard to soar like an eagle when you hang with a bunch of turkeys.

5. Invest in experiences, not stuff

Our goal shouldn’t be to die with the biggest pile of money. Life is precious, and we want to live it, and live it well.

That doesn’t mean having the biggest house or the fastest car. He who dies with the most toys doesn’t win — he who dies with the most meaningful experiences does. The shine and feel of that brand new Aston Martin diminishes with age. However, that once-in-a-lifetime African safari and your memories of it will get sweeter with age.

Time is much more valuable than money. Don’t delude yourself into thinking that you’re working an extra 10 hours for your family.

No matter how young your loved ones are, they intuitively know that time is more valuable than money. Where you spend your time, it tells them what you value. An hour spent reading, playing tag, or going to the park is not only costless — it’s priceless.

One final piece of advice from a master

Charlie Munger is famous for many quotes.

Here’s one of my favourites: “The best way to get what you want, is to deserve what you want.”

By following the steps above, you’ll be well down the path of deserving whatever it is that you want to achieve in 2011 … and beyond.

So what are you waiting for? Go get it! And if you find this advice at all valuable, pass it along, tweet it, link to it on Facebook, and share it with those who you believe will benefit from it.

This roadmap was written by Buck Hartzell and reprinted from the Motley Fool.

A personal road map - Part 1

I’ve created a personal roadmap for the rest of 2011, listing several health, financial, family, and travel goals I want to achieve in the second half of this year. One of those goals is to give back and help others more. With that in mind, I’ve decided to publish my brief list of what I think everyone should know — but might not.

I believe that persistently and consistently following these simple guidelines and rules could make you rich. In my experience, these simple lessons aren’t learned in high school, or even at university.

Here are the lessons everyone should know and hold dear. I hope they’ll save you from you saying “woulda, coulda, shoulda” 20 years from now.

Simple rules, life lessons

As a parent of three inquisitive and fun-loving little beings, I think it’s important that they begin to learn and understand these lessons, even at an early age. I hope that they will become self-sufficient and also earn the freedom to chase their dreams someday.

1. Spend less than you make

I could say it many different ways. “Be a net saver.” “Avoid high-interest debt.” All the points are the same.

Everyone needs to learn as soon as possible that it’s extremely important to save and invest some of your earnings. Unfortunately, you can’t turn to our country, your friends, or institutions of higher learning to get this lesson.

Instead, here are three ways to impart this lesson to those you love:

• Match savings. Each year on their birthdays, we match our children’s savings. Currently, that match rate sits at 100%. So each time, during the year when they want to purchase that cool radio-controlled car, or fancy new doll that actually wets itself, they realise that it costs them double. A dollar saved today is worth two dollars on their birthday. It makes them think twice about impulsive purchases.
• Make them earn part. If a dependant loved one wants something, encourage them to go get it, and match what they do. If your sixteen-year-old wants a car, tell them you’ll pay half once they’ve earned and saved up the first half of the price.
• Buy a smaller home. The biggest purchase most people make is their home. Most people mistakenly think of their home as an investment, and buying way more house than they could afford. To make sure you don’t end up “house poor,” consider these guidelines:
• Don’t buy a house unless you plan to live there for at least seven years.
• Don’t spend more than four times your gross household income on a home.

This roadmap was written by Buck Hartzell and reprinted from the Motley Fool.