If you are over 18 and have ever applied for any form of credit then you have a credit record. This can occur seamlessly and without you realizing it. Your credit record may be of little interest to you until you decide to apply for some form of finance. Worse still, you may be in the process of purchasing a property blissfully unaware of your credit history containing some late payments or defaults. It is not uncommon for people to have a bad credit history without having any awareness of this. They make a purchase and pay their deposit and only then learn the bad news form their chosen lender – they do not lend to bad credit borrowers and you appear to be one of those.
Who would have thought? After all you are employed in a stable job, have no other debt and a good deposit saved, making you a perfect candidate for a home loan, right? Well it is not that simple. Understanding how credit reporting works and how it is used by lenders can save you a lot of heartache as well as help you avoid loosing a home deposit on a purchase that you commit to but cannot settle.
What is a credit record
Your credit record is like an identity record that is attached to each and every Australian resident. It is stored by credit reporting agencies and is accessed by lenders whenever they receive a credit application from you as a borrower or a guarantor. The credit record includes information such as the individual’s age, address, occupation, current debts and repayment records. It also includes negative events such as defaults, late payments, arrears, judgments, bankruptcy etc.
How to find out what is on your credit record
It is simple enough to find out what is on your credit report. Credit reporting agencies can provide this information to the record owner for the asking. Veda Advantage is one such agency. Simply for to www.mycreditfile.com.au and request a copy of your report. They will charge for an instant report. If you are prepared to wait for 10 days – the information is available for free. It is essential to sight a copy of your report before making any purchases or applications for finance.
Identifying and addressing problems
Credit report can and do regularly have errors and out of date information.If you identify an error or an item that you believe is not your debt/responsibility, contact the credit provider and challenge them. Ask for proof of their claim otherwise you are entitled to insist that the bad credit entry is removed. Correcting errors can take some time. However if an item is not an error but simply an omission on your part, try to get it fully paid before making applications for finance. Make sure that you only apply to lenders who will accept your credit history(warts and all). It is pointless withholding information as your credit report will set the record straight, so honesty is definitely the best policy.
Why Positive Credit Reporting?
Up until recently, Australia only had negative credit reporting. That means that lenders had no visibility of timely loan payments but were only made aware of omissions, defaults and arrears. Consequently a small missed payment could preclude an individual from borrowing through a bank for a long time. Positive Credit reporting was introduced in Australia in 2013. This means that our credit agencies are capturing both good and bad credit behavior of each and every adult resident. Borrowers who always pay on time and are very diligent but have had a small mishap/omission should still be able to qualify for finance with a mainstream lender. Positive Credit reporting enables lenders to build an accurate picture of the credit activity of an applicant (good and bad). It also gives generally diligent borrowers a better chance of qualifying for finance than they had under the previous credit reporting system – and that is a good thing!