Erica Voelkel, financial strategist from Australian Capital Developments (trading as AFD Loans), has written a book aimed at helping millennials avoid screwing up their credit reputation.
It’s called #MONEYPLAN – How Millennials can avoid Financial Stuff Ups and it aims to help people avoid years of unnecessary credit file angst.
“Whether people realise it or not, every person in Australia over 18 has a credit report,” Ms Voelkel said.
“A credit report details your credit history, loan applications, defaults, inquiries, and all of your personal information.
“Credit providers derive a score from your credit report which indicates your suitability for loans. The better your credit score the better you look to a provider.
“A poor score can see you rejected by primary and secondary lenders, leaving you vulnerable to third tier, or “pay day” lenders as they are known, who usually charge reprehensibly high rates of interest accompanied by excessive late payment fees.
“And that’s where the problems can start.”
Ms Voelkel’s book was inspired by the story of Clinton - a young man on the verge of suicide, not figuratively but literally, due to the financial strife he had got himself into.
“Clinton was a second-year apprentice, who 12 months prior moved out of home, got a loan for a car and was happily living the life of a young 18-year-old man on a reasonable wage and a secure future,” Ms Voelkel said.
“Clinton had a great background, his father was working for the same company for 30 years and owned two investment properties and his own home and was financially secure.
“However, Clinton was now paying rent, paying off a car, phone, insurances and moved out of his ‘means’ so he started going to payday lenders to keep rent or car up to date.”
The situation compounded and escalated. Clinton eventually broke down emotionally when, just before Christmas, his apprenticeship and employment were terminated.
He went to his dad (Tom) and confessed not only about his debt, but how he wanted to “end it all”.
“Clinton’s father found us and long, story short I fixed it,” Ms Voelkel said.
“Over 12 months I negotiated and cajoled to get the debts reduced, under arrangement or wiped altogether. It gave Clinton some breathing space and hope.
“This young man on the verge of suicide now has a steady, well-earning job, $30k saved and will soon be looking to us to broker finance for his first home.”
Clinton’s story, which makes up one chapter of Ms Voelkel’s book, was the catalyst for the entire project.
“My [then 16-year-old] daughter who is a financial services trainee at AFD Loans, was present when Clinton and his father came into our office with their very common, but intensely sad story of financial disaster,” Ms Voelkel said.
“When they left my daughter turned to me with tears in her eyes and utterly dumfounded said, “Why doesn’t he know about credit files, budgeting, managing money and spending in general?”
The book includes simple information on how to keep a healthy file, including:
- Set up an account for direct debits (separate to your everyday transaction account) to ensure they are paid on time
- Plan big payments for pay day
- Keep track of your commitments, review them regularly
- Don’t neglect payments on your TV or laptop, it is equally as important as your car or home payment as far as a credit file goes.
- Close unnecessary accounts
- If you are having trouble making payments, contact your provider,
- Do not ostrich yourself (Bury your head in the sand), it makes things worse.
Ms Voelkel is in the process of establishing a foundation which she hopes will enable the book to be delivered free to every school leaver in Australia when it becomes available in 2018.
“I want to run workshops demystifying money, saving, spending, borrowing and credit, and workshops to assist people who are in credit file strife to understand why, and co-pilot their journey out of it,” she said.
“I’m working on delivering primary school-level ‘Money Days’ just to start the conversation early, encourage discussion at home - imagine if Clinton had been more open earlier with his Dad.”
Ms Voelkel passionately believes Individuals need to be in control of their credit reputation, particularly when it has such a massive, personal, emotional, financial and lasting impact on their future.
“Why is the credit file such a secret?” she asks. “The information is there, people just don’t know to look or where to look.”
AFD Loans is located at 454 Lake Road, Argenton. To contact, ring 02 4950 8011, email firstname.lastname@example.org or visit www.afds.com.au.