Do you know what’s on your credit report? You should, because it can affect your ability to borrow money in the future.
A credit report is a record of how well you’ve handled debt and credit in the past and lenders may use it to help determine whether they’ll lend you money, for example when you apply for a new credit card, car finance or home loan.
It’s important to understand what’s on your credit report, events that could leave a black mark on your record and ways to improve a negative credit rating. To help you do that, here’s everything you need to know about credit reports.
1. What’s included on a credit report?
In March 2014, the government introduced a new comprehensive credit reporting regime allowing credit agencies to capture a wider and more detailed range of information about your finances.
Prior to the new regime, Australia had a negative credit reporting system. This meant that only negative information was captured on your report, such as when you defaulted on a debt.
Comprehensive credit reporting means that credit agencies now capture positive as well as negative information, for example if you have kept up to date on your repayments with existing debts, or whether previous credit applications were approved.
There are four main categories of information captured on your credit report:
- Personal information
- This includes your name and previous names, date of birth, current address and two previous addresses, drivers license number and current employer.
- Credit information
- The amount of credit available to you (all current loans, including loans where you are a guarantor and commercial or business loans), basic information about the loans, previous credit applications and their results.
- Debt repayment history
- Whether your debt repayments have been paid on time, any late payments (more than 14 days overdue, including utility and telecomm payments), or if you have defaulted on a debt.
- Other information
- For example, whether you have been declared bankrupt in the last seven years, any court judgements about your credit, and information on personal insolvency agreements. There will also be a record of which lenders have requested to see a copy of your report.
A default is defined as a debt of more than $150 that is 60 days overdue where you have received two notices for repayment.
2. Accessing your report
Before you access report, be aware you can easily check your credit score by visiting GetCreditScore.com.au. It’s simple, quick and free, and will give you a guide about where you sit. Why not do it right now?
To get a copy of your full credit report, you have to go through a credit reporting agency. There are three main players in Australia:
(The Tasmanian Collection Service also collects credit information for Tasmanian residents.)
Many credit agencies will want you to pay them money to access your report, but here’s the thing: you don’t have to! Credit agencies are required to provide you with a free copy of your report in a number of situations:
- Every 12 months
- If you have been rejected for credit
- If you have lodged a correction request to change information on your report, and have received advice that it has been updated
The free report that you are entitled to each year will generally be despatched in around ten business days, although you can pay to receive it more quickly.
3. Improving your credit report
Poor credit ratings can be caused by missed or late payments, defaulting on a debt, being rejected for a loan, or mistakes made by a creditor or credit rating agency. Other things, like a patchy employment history, having an excessive amount of debt, or regularly changing your address can also weigh you down.
If you suspect you may have a bad credit score, or have been rejected for credit, the first step towards improving your situation is to understand why:
- Request a free copy of your report from one or each of the main credit agencies and review the report for accuracy and possible black marks.
- Make sure to update credit agencies immediately if the information contained on your report is incorrect, or get in touch with a creditor directly if they have incorrectly listed you as defaulting or being late on debt repayments and request to have this rectified.
The next step is to start improving your financial situation.
Get organised and put a system in place to make sure you pay all of your bills on time every month.
If possible, try to reduce the amount of credit you have access to, for example, by cutting down how many credit cards you own or paying down other debts like a personal loan or car loan.
While overdue or defaulted debts will not be removed from your credit report until five years have passed, it makes sense to get on top of things as quickly as possible to start building up your ‘good’ credit history.
Finally, don’t apply for needless credit and understand your situation before applying for loans.
For example, if you have a patchy credit history, it may be worth waiting to apply for a serious debt like a home loan until you have been at your current job and residence for at least a year, and have consistently made your other debt repayments on time.
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