Critical Credit Fact 1: You can boost your credit score and lower your personal debt if you establish separate credit from your spouse. Entrepreneurs in particular can benefit from this tip, which allows you to use your spouse’s credit when applying for a loan or line of credit. It works like this – When applying for credit, transfer high credit card balances to your spouse’s credit cards. As your outstanding debt is lowered, your credit score will increase, which makes you look like a more favorable candidate for the loan. Of course you will have to return the favor if your spouse ever needs a quick credit score increase.Critical Credit Fact 2:A lackluster credit score may mean higher auto insurance premiums. You probably already know that people with bad credit are likely to have high interest rates on their credit cards, mortgages, and car loans. But you probably didn’t know that bad credit means that in most states your auto insurance premiums are higher, yet another reason those three little numbers can have a six-digit impact on your life!Critical Credit Fact 3:4 out of 5 people have at least one error on their credit reports. According to a U.S. Public Interest Research Group survey, almost 80 percent of people have errors on their credit reports, 25 percent of which are serious enough to cause a person to be turned down for a job or loan.Critical Credit Fact 4:Perhaps the most common (and among the most damaging) error on a credit report is a duplicate collection notice. If you notice more than one collection agency reporting your account to the credit bureaus, you should work quickly to have this removed. Accounts that have been turned over for collection are often sold by one collection company to another. As a result, your outstanding debt will be listed multiple times.Keep in mind that when a bill is turned over the collection, it will appear twice on your credit report: 1) the original creditor will keep the account on your credit report, noting the delinquent payment history and that the account has been turned over for collection; 2) as well, the collection agency responsible for collecting the debt will list the account. However, if multiple collection agencies are reporting that they are collecting on the same account, demand that the duplicate entries be removedCritical Credit Fact 5:Collection accounts only minimally hurt your credit after two years, and after four years, the damage is all but erased. After seven years, a collection account is wiped from your report.Critical Credit Fact 6: You should always apply for credit using the same first, middle, and last name. For instance, if your name is Robert Michael Jones, Jr., you shouldn’t apply as Bob M. Jones, Jr., or any of the other variations of your name. Pick one name and stick with it, or risk having your credit information divided among the various names. Worse yet, it could be merged with another person’s information (for instance, if you are Robert Michael Jones, Jr., and your father is Robert Michael Jones, the credit bureaus might combine your files if you do not use “Jr.” when applying for credit).That said – if you changed your last name upon marrying, start applying for credit under your new name. It might hurt your credit minimally, but the damage will be temporary; the new last name is forever.Critical Credit Fact 7:Purchasing a car, furniture, a computer, or other large household appliance through an installment loan might help your credit. An installment loan is a purchase agreement whereby the borrower repays the loan in equal periodic payments. Having an installment loan is one of the fastest ways to increase your credit score. If you don’t have an installment loan, consider asking your local bank for a small loan ($1,000) secured by your existing car, or purchase your next computer or household appliance through an installment loan.Many furniture stores also offer installment loans, but shoppers should be aware that it is sometimes difficult to determine whether they are purchasing items through an installment loan or a retail account. Be sure to ask.Critical Credit Fact 8:A single late payment on one card can affect the interest rates on all of your credit cards. Many borrowers are surprised to learn about the Universal Default Clause, a small-print item you probably agreed to when applying for your most recent credit card. The Universal Default Clause allows credit card companies to charge you a 29.9 percent interest rate (or higher) if you ever make a late payment on any one credit card, even if that card isn’t issued by that company. Credit card companies periodically pull your credit report and raise your interest rate based on the history of other accounts your maintain. Credit card companies say that they believe your behavior on one credit card might be the same on all credit cards.Critical Credit Fact 9:Closing your credit cards could hurt your score, and it will almost never help your score. Because the length of time you have had credit affects about 15 percent of your credit score, closing a credit account will lower the average age of your accounts. Allowing credit cards to become inactive also hurts your score. Use credits at least once a month, and keep them open!Critical Credit Fact 10: Your score will not harmed by inquiries into your own credit report. If you request your own credit score, the inquiry will show up as a soft inquiry. Unlike hard inquiries (those pulled by potential lenders as a way to determine whether they should approve a loan or credit application), soft inquiries do not affect your credit score.Critical Credit Fact 11:If your credit score is high enough, some lenders won’t consider your salary before giving you the lowest available interest rate. Indeed, your credit score is perhaps the most important factor in determining whether lenders approve your credit card application, mortgage loan, or car loan. It matters more than your annual salary and much, much more than your net worth.Critical Credit Fact 12:Walt Disney and Mark Twain both claimed bankruptcy. Bad credit happens to all types of people. The true test of character and responsibility is how a person deals with bad credit. Do not ignore it, hope it disappears and bury your head in the sand? Or do you jump in, learn how to fix your mistakes and move forward?You credit score can have a significant impact on your life – It is your financial reputation. A credit score below 720 makes you a higher credit risk to lenders and creditors. On the other hand, a credit score of 720 or greater in most cases automatically qualifies you for the very best loans, deals and credit at the lowest interest rates. Knowing the facts can make a huge difference in how you decide to pursue the path to excellent credit health.

The two most frequently asked questions by investors are:What investment should I buy?
Is now the right time to buy it?Most people want to know how to spot the right investment at the right time, because they believe that is the key to successful investing. Let me tell you that is far from the truth: even if you could get the answers to those questions right, you would only have a 50% chance to make your investment successful. Let me explain.There are two key influencers that can lead to the success or failure of any investment:External factors: these are the markets and investment performance in general. For example:
The likely performance of that particular investment over time;
Whether that market will go up or down, and when it will change from one direction to another.
Internal factors: these are the investor’s own preference, experience and capacity. For example:
Which investment you have more affinity with and have a track record of making good money in;
What capacity you have to hold on to an investment during bad times;
What tax advantages do you have which can help manage cash flow;
What level of risk you can tolerate without tending to make panic decisions.When we are looking at any particular investment, we can’t simply look at the charts or research reports to decide what to invest and when to invest, we need to look at ourselves and find out what works for us as an individual.Let’s look at a few examples to demonstrate my viewpoint here. These can show you why investment theories often don’t work in real life because they are an analysis of the external factors, and investors can usually make or break these theories themselves due to their individual differences (i.e. internal factors).Example 1: Pick the best investment at the time.Most investment advisors I have seen make an assumption that if the investment performs well, then any investor can definitely make good money out of it. In other words, the external factors alone determine the return.I beg to differ. Consider these for example:Have you ever heard of an instance where two property investors bought identical properties side by side in the same street at the same time? One makes good money in rent with a good tenant and sells it at a good profit later; the other has much lower rent with a bad tenant and sells it at a loss later. They can be both using the same property management agent, the same selling agent, the same bank for finance, and getting the same advice from the same investment advisor.
You may have also seen share investors who bought the same shares at the same time, one is forced to sell theirs at a loss due to personal circumstances and the other sells them for a profit at a better time.
I have even seen the same builder building 5 identical houses side by side for 5 investors. One took 6 months longer to build than the other 4, and he ended up having to sell it at the wrong time due to personal cash flow pressures whereas others are doing much better financially.What is the sole difference in the above cases? The investors themselves (i.e. the internal factors).Over the years I have reviewed the financial positions of a few thousand investors personally. When people ask me what investment they should get into at any particular moment, they expect me to compare shares, properties, and other asset classes to advise them how to allocate their money.My answer to them is to always ask them to go back over their track record first. I would ask them to list down all the investments they have ever made: cash, shares, options, futures, properties, property development, property renovation, etc. and ask them to tell me which one made them the most money and which one didn’t. Then I suggest to them to stick to the winners and cut the losers. In other words, I tell them to invest more in what has made them good money in the past and stop investing in what has not made them any money in the past (assuming their money will get a 5% return per year sitting in the bank, they need to at least beat that when doing the comparison).If you take time to do that exercise for yourself, you will very quickly discover your favourite investment to invest in, so that you can concentrate your resources on getting the best return rather than allocating any of them to the losers.You may ask for my rationale in choosing investments this way rather than looking at the theories of diversification or portfolio management, like most others do. I simply believe the law of nature governs many things beyond our scientific understanding; and it is not smart to go against the law of nature.For example, have you ever noticed that sardines swim together in the ocean? And similarly so do the sharks. In a natural forest, similar trees grow together too. This is the idea that similar things attract each other as they have affinity with each other.You can look around at the people you know. The people you like to spend more time with are probably people who are in some ways similar to you.It seems that there is a law of affinity at work that says that similar things beget similar things; whether they are animals, trees, rocks or humans. Why do you think there would be any difference between an investor and their investments?So in my opinion, the question is not necessarily about which investment works. Rather it is about which investment works for you.If you have affinity with properties, properties are likely to be attracted to you. If you have affinity with shares, shares are likely to be attracted to you. If you have affinity with good cash flow, good cash flow is likely to be attracted to you. If you have affinity with good capital gain, good capital growth is likely to be attracted to you (but not necessary good cash flow ).You can improve your affinity with anything to a degree by spending more time and effort on it, but there are things that you naturally have affinity with. These are the things you should go with as they are effortless for you. Can you imagine the effort required for a shark to work on himself to become sardine-like or vice versa?One of the reasons why our company has spent a lot of time lately to work on our client’s cash flow management, is because if our clients have low affinity with their own family cash flow, they are unlikely to have good cash flow with their investment properties. Remember, it is a natural law that similar things beget similar things. Investors who have poor cash flow management at home, usually end up with investments (or businesses) with poor cash flow.Have you ever wondered why the world’s greatest investors, such as Warren Buffet, tend only to invest in a few very concentrated areas they have great affinity with? While he has more money than most of us and could afford to diversify into many different things, he sticks to only the few things that he has successfully made his money from in the past and cut off the ones which didn’t (such as the airline business).What if you haven’t done any investing and you have no track record to go by? In this case I would suggest you first look at your parents’ track record in investing. The chances are you are somehow similar to your parents (even when you don’t like to admit it ). If you think your parents never invested in anything successfully, then look at whether they have done well with their family home. Alternatively you will need to do your own testing to find out what works for you.Obviously there will be exceptions to this rule. Ultimately your results will be the only judge for what investment works for you.Example 2: Picking the bottom of the market to invest.When the news in any market is not positive, many investors automatically go into a “waiting mode”. What are they waiting for? The market to bottom out! This is because they believe investing is about buying low and selling high – pretty simple right? But why do most people fail to do even that?Here are a few reasons:When investors have the money to invest safely in a market, that market may not be at its bottom yet, so they choose to wait. By the time the market hits the bottom; their money has already been taken up by other things, as money rarely sits still. If it is not going to some sort of investment, it will tend to go to expenses or other silly things such as get-rich-quick scheme, repairs and other “life dramas”.
Investors who are used to waiting for when the market is not very positive before they act are usually driven either by a fear of losing money or the greed of gaining more. Let’s look at the impact of each of them:
If their behaviour was due to the fear of losing money, they are less likely to get into the market when it hits rock bottom as you can imagine how bad the news would be then. If they couldn’t act when the news was less negative, how do you expect them to have the courage to act when it is really negative? So usually they miss out on the bottom anyway.
If their behaviour was driven by the greed of hoping to make more money on the way up when it reaches the bottom, they are more likely to find other “get-rich-quick schemes” to put their money in before the market hits the bottom, by the time the market hits the bottom, their money won’t be around to invest. Hence you would notice that the get-rich-quick schemes are usually heavily promoted during a time of negative market sentiment as they can easily capture money from this type of investor.
Very often, something negative begets something else negative. People who are fearful to get into the market when their capacity allows them to do so, will spend most of their time looking at all the bad news to confirm their decision. Not only they will miss the bottom, but they are likely to also miss the opportunities on the way up as well, because they see any market upward movement as a preparation for a further and bigger dive the next day.Hence it is my observation that most people who are too fearful or too greedy to get into the market during a slow market have rarely been able to benefit financially from waiting. They usually end up getting into the market after it has had its bull run for far too long when there is very little negative news left. But that is actually often the time when things are over-valued, so they get into the market then, and get slaughtered on the way down.So my advice to our clients is to first start from your internal factors, check your own track records and financial viability to invest. Decide whether you are in a position to invest safely, regardless of the external factors (i.e. the market):If the answer is yes, then go to the market and find the best value you can find at that time;
If the answer is no, then wait.Unfortunately, most investors do it the other way around. They tend to let the market (an external factor) decide what they should do, regardless of their own situation, and they end up wasting time and resources within their capacity.I hope, from the above 2 examples, that you can see that investing is not necessarily about picking the right investment and the right market timing, but it is more about picking the investment that works for you and sticking to your own investment timetable, within your own capacity.A new way to invest in propertiesDuring a consultation last month with a client who has been with us for 6 years, I suddenly realised they didn’t know anything about our Property Advisory Service which has been around since April 2010. I thought I’d better fix this oversight and explain what it is and why it is unique and unprecedented in Australia.But before I do, I would like to give you some data you simply don’t get from investment books and seminars, so you can see where I am coming from.Over the last 10 years of running a mortgage business for property investors:We have executed more than 7,000 individual investment mortgages with around 60 different lenders;
Myself and our mortgage team have reviewed the financial positions of approximately 6,000 individual property investors and developers;
I have enjoyed privileged access to vital data including the original purchase price, value of property improvements and the current valuation of close to 30,000 individual investment properties all around Australia from our considerable client base.When you have such a large sample size to do your research on and make observations, you are bound to discover something unknown to most people.I have discovered many things that may surprise you as much as they surprised me, some of which are against conventional wisdom:Paying more tax can be financially good for you.This one took me years to swallow, but I can’t deny the facts. The clients who have managed to get into a positive cashflow position have paid a lot of tax and will continue to pay a lot of tax, whether it is capital gains, income tax or stamp duty. They don’t have an issue with the tax man making some money as long as they continue to make more themselves! They regularly cash in the profits from their properties and reduce their debt, but always continue to invest and park their money where the return is best. In fact, I can almost say that the only people who enjoy positive cashflow from their investment properties are the people who have little concern about paying taxes as they treat them as the cost of doing business.Just about every property strategy works. It just depends on who does it, how it is done, when it is done and where it is done.When I first started investing, I went and read many property investment books and attended many investment educational seminars. Just about every one of them was convincing and this confused the hell out of me. Just when I was about to form an opinion against a particular property strategy, someone would show up in one of my client consultations and prove that it worked for them!After testing many of these strategies myself, I came to realise that it is not about the strategy,(which is only a tool) but rather it is about whether the person is using the tool appropriately at the right time, in the right place and in the right way.There is no such thing as the best suburb to invest in, forever.If you randomly pick a particular property in what you think is the best suburb over a 30 year window, you will find that there are periods during which this property will outperform the market average, and there are periods when this property will underperform the market average.Many property investors find themselves jumping into historically high growth suburbs at the end of the period when it is outperforming the average, and then stay there for 5-7 years during the underperforming period. (Naturally this can taint their view of property investing as a whole!)There is no such thing as the worst suburb to invest in, forever.If you pick a property in the worst suburb you can think of from 40 years ago, and pitch that against the best suburb you can think of over the same period of time, you will find they both grew at about 7-9% a year on average over the long-term.Hence in the 1960s, a median house in Melbourne and Sydney was valued at $10k. The worst property around that time may have been 30% of the median price for then, which was say about $3k. Today, the median house price in these cities is about $600k. The worst suburb you can find is still around 30% of that price which is say $200k a house. If you believe a bad suburb will never grow, then show me where you can find a house today in these cities, that is still worth around $3k.Median Price growth is very misleading.Many beginner property investors look at median price growth as the guidance for suburb selection. A few points worth mentioning on median price are:We understand the way median price is calculated as the middle price point based on the number of sales during a period. We can talk about the median price for a particular suburb on a particular day, week, month, year, or even longer. So an influx of new stocks or low sales volume can severely distort the median price.In an older suburb, median price growth tends to be higher than it really is. This is because it does not reflect the large sum of money people put into renovating their properties nor does it reflect the subdivision of large blocks of land into multiple dwellings which can be a substantial percentage of the entire suburb.In a newer suburb, median price growth tend to be lower than it really is. This is because it does not reflect the fact that the land and buildings are both getting smaller. For example, you could buy a block of land of 650 square metres for $120k in 2006 in a newer suburb of Melbourne, but 5 years later, half the size block (i.e.325 square metres) will cost you $260k. That’s a whopping 34% annual growth rate per year for 5 years, but median price growth will never reflect that, as median prices today are calculated on much smaller properties.Median price growth takes away people’s focus from looking at the cost of carrying the property. When you have a net 2-3% rental yield against interest rates of 7-8%, you are out-of-pocket by 5% a year. This is not including the money you have to put in to fix and maintain your property from time to time.Buying and holding the same property forever doesn’t give you the best returns on your money.The longer you hold a property, the more likely you will achieve an average growth of 7-9%. But you will be bound to hit periods where your property outperforms the 7-9% growth and periods where it under performs the 7-9% growth.The longer you hold a property, if its growth is at or above average, the lower its rental yields will become.The longer you hold a property, the higher the capital gains tax you will need to pay when you sell, and the less likely you will be able to sell it.The longer you hold a property, the more likely there will be a need for an expensive upgrade of the property.The longer you hold a property, the more likely you will forget which part of the equity actually belongs to the tax man, AND the more likely you will be to try to leverage the equity that doesn’t belong to you. This can get you into a negative equity position with a negative cashflow forever, unless you have proper financial guidance.