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 Veda or Dun and Bradstreet.
Comprehensive credit reporting – the new system
Prior to March 2014, credit reports provided limited details, like a record of applications for credit, as well as ‘negative’ information on missed or outstanding payments on facilities (known as defaults), court judgements or bankruptcies.
In March 2014, changes to the Privacy Act 1988 allowed credit reports to include a much wider range of information.
The new system, called 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.
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.
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.