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What changes have been made to the Australian Credit Reporting process and what do they mean for you?
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 Veda or Dun and Bradstreet 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.
Talk to the credit reporting experts and make sure your finances are in order.