Credit reporting and home loans

Your personal credit report plays a key role in the loan approval process and changes to Australia’s credit reporting system make it vital to maintain a healthy credit record.

Your credit report – worth getting to know

Your personal credit report plays a key role in the loan approval process and changes to Australia’s credit reporting system make it vital to maintain a healthy credit record.

Whenever you apply for a loan or other credit, lenders will look at your personal credit report. This is a written record of how well you have managed debt in the past, and it’s maintained by credit reporting agencies like Equifax and illion.

Comprehensive credit reporting

Comprehensive Credit Reporting, is designed to give lenders a more complete picture of how you manage debt. Along with information about the types of credit you use and your credit limits, your report may provide details about how you have managed your credit commitments i.e. whether you've made your required repayments on time.

The impact on your loan application

With both positive and negative details of your credit history available, lenders are better placed to assess your ability to manage a loan. This can help to fast track the loan approval process and may even result in you being eligible for a lower interest rate.

Quick tips to keep your credit report in good shape

The introduction of comprehensive reporting brings Australia into line with many other countries. It also has key implications for the way each of us manages personal debt.

Maintaining a strong credit report makes you attractive to lenders and this increases the likelihood of securing competitively priced loans from mainstream lenders.

Taking a few simple steps can mean avoiding unwanted black marks on your credit report:

  • Set up automatic direct debits for loan and credit card repayments.
  • Schedule loan repayments for pay days.
  • Keep track of all your credit commitments.
  • Apply for a loan or credit only when you really need it.
  • Close credit card accounts that you don’t use or need.
  • If you are likely to have trouble meeting loan repayments, contact the lender before the payment is due to request an extension of time or to renegotiate the payment terms. Don’t just skip a payment.

When your credit record is adverse

Australia’s Credit Ombudsman has warned about some credit repair services, which promise to remove adverse listings from your credit file – often for an expensive fee and do not deliver on their promises. Often, the same outcome can be achieved at no cost to you.

If you are thinking about using a service like this, be sure to first speak with your Mortgage Choice broker, as they will be able to recommend a reputable agent.

Your Mortgage Choice broker can help

Your credit record is a valuable asset when it comes to securing loan approval. Yet many people discover there is a problem with their credit report only when they apply for a loan. This is why it is vital to review your credit record regularly to ensure it is up to date and accurate.

Your Mortgage Choice broker can request a copy of your credit report on your behalf. It’s a free service for you, and is a step that should be taken at least annually - even if you have no immediate plans to apply for a loan.

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Get your free credit report from your Mortgage Choice broker today.

Credit reporting FAQs

Your credit report is a written record that notes what loans and credit facilities you've sought in the past, possibly which of these are still in place and possibly how well you have repaid those loans and facilities in the past. It includes details of any repayments that are 60 days or more overdue (termed defaults). Your credit report also shows details of personal bankruptcies, court judgements, debt agreements or insolvency agreements organised in your name. Some lenders may also provide month-by-month details of how you have made the required repayments, covering up to the past two years.

Whenever you apply for a loan or credit, the lender will want to take a look at your credit report to get an idea of how well you have managed debt in the past. This plays an important role in the lender’s decision to offer you finance or other forms of credit, like a credit card. Having a high quality credit report can also speed up loan approval, as well as impacting the interest rate you pay.

For many years Australia has had a ‘negative’ reporting system that focused on defaults and other problems. Since March 2014, it is possible for credit reports to be more comprehensive, allowing credit providers to access more detailed information to aid in lending decisions. This includes details of repayments that have been made on time plus information about defaults that have subsequently been paid in full.

A default is something lenders regard very seriously. It is more than just an occasional late payment - a default is recorded on your credit file when a payment of more than $150 is more than 60 days overdue and you have received written reminders of the outstanding payment.

The only bodies that can contribute detailed repayment information to your credit report are holders of an Australian Credit Licence. That typically means providers of a home loan, personal loan or credit cards.

However, other service providers such as power companies or telecommunications companies can enter details of defaults or judgements on your credit file.

You can approach credit reporting agencies like Equifax and illion directly to receive a copy of your credit report. However, an easier option can be to speak with your Mortgage Choice broker, who can obtain a copy of your credit report on your behalf and walk you through its contents so you know exactly where you stand in terms of your credit history.

Get your free home loan quote without affecting your credit report.

Posted in: Home loans