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What you should know about your credit report

Most people go through life not thinking too much about their credit report. But if you apply for a loan or credit, it could end up being what determines whether your application is approved or rejected..

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So what is it?

Your credit report or file is a record of all the interactions you’ve had with credit or utility providers over the previous five years. If you’ve been late paying a bill, the credit provider may report this also and transfer your account to a collections agency. Organisations refer to it to assess your ability to repay a loan, credit card, phone or electricity or gas account.

 

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POLL: HAVE YOU CHECKED YOUR CREDIT REPORT RECENTLY?

  • No, I haven't checked my credit report recently (44%, 4 Votes)
  • No, I've never checked my credit report (33%, 3 Votes)
  • Yes, in the last 12 months (22%, 2 Votes)

Total Voters: 9

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If you’ve defaulted on any loans, been insolvent or bankrupt, or had any financial court judgements awarded against you, it will be recorded here.  If a provider feels you are a high risk, they may refuse you credit or charge you a higher interest rate. If you are concerned at all about your credit report, have a chat with your mortgage broker who will be able to talk through any concerns.

Since March 2014, the reports contain a lot more information as Australia introduced “comprehensive” credit reporting (CCR). The change lets credit providers access more information to help them make better lending decisions. The full impact of CCR is yet to rollout for some time, however users of credit should be aware that in the future, a missed loan payment or a bill paid 7 days late may be visible to credit providers in the future and may impact your ability to obtain credit and the cost associated with that credit.

A common misconception is that your credit report contains a predetermined rating that is then sent out to credit providers. The reality is that each provider determines your individual credit rating based on its own criteria. So if one rejects your loan or credit application, you may be successful with another one.

 

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This doesn’t mean you should send off multiple applications to different lenders as your credit file records all your credit applications, even ones you don’t follow through with. Having a number of applications on your record raises red flags for some lenders, so it’s best only to apply to lenders you feel you have a good chance of obtaining credit from. In many instances, when it comes to inquiring about credit, “less is more”.

 

Permission please

Credit providers can only access your file if you have provided them with your consent. If you want to see your file, you are entitled to one free copy every 12 months – although you generally have to pay a fee if you need it within 10 days. It is also free if you apply within 90 days of having a credit application rejected. You can request a copy from a credit-reporting agency such as Veda or Dun and Bradstreet. If you request from one of these agencies, it doesn’t register an ‘inquiry’ as it would for credit providers.

While you may not want a loan at the moment, it makes sense to check out your credit report anyway to ensure it doesn’t contain any mistakes. It’s best to be prepared for when you do need to borrow or extend your credit.

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James Hardiman

James has had a financial and professional services career spanning almost 20 years. He has been with Homeloans since 2012 and has vast experience in business banking, relationship management and business development. Prior to banking and finance, James worked with Ernst and Young as an accountant in the firm’s Audit and Business Services division.

The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Homeloans Ltd.