If, like most people, you have borrowed money (credit card, mortgage, car) then you will have a ‘credit file’. Amongst other things, banks, retailers and other credit providers rely on your credit file when deciding whether to lend you money or not.
Every credit provider has their own lending criteria. They will attach varying degrees of importance to the information provided in the credit file and that which they obtain from you, depending on the amount of risk they wish to take when deciding whether or not to approve credit.
What is a credit file?
A credit file records information about people who have been credit-active during the past seven years. Contained in your credit file is information about you and your credit history including:
- Personal details such as: name, residential addresses, date of birth, drivers license number and current or previous employer/s
- Credit applications and enquiries you have made during the past five years
- Records of some current credit accounts
- Overdue accounts (defaults) which may have been listed against your name
- Bankruptcy information
- Default judgments
- Public record information
Public record information
Your file may contain items on the public record such as:
- Judgment and writ/summons information obtained from the various courts around Australia
- Bankruptcy/Part X/Part IX information obtained from the Insolvency and Trustee Service Australia (ITSA) in each state
- Directorship information obtained from the Australian Securities and Investment Commission (ASIC)
- Proprietorships
Should I get a copy of my credit file?
If you are applying for a home or business loan, it is a good idea to get a copy. It is easy to do and costs very little. You can do this at www.mycreditfile.com.au. Getting a copy of your credit information file will assist you in managing your personal information and also help you to better assess your own credit-worthiness.
How do I maintain my credit-worthiness?
Most Australians maintain a ‘clean’ credit file. It’s really about personal finance hygiene! The following steps will ensure yours stays clean:
- Pay your bills on time
- Call your credit provider(s) in a timely manner and alert them if there is a problem meeting your commitments
- Review your credit file to make sure there are no errors in the information and/or discover any overdue accounts that have been forgotten about.
- Monitor your credit file to ensure someone is not fraudulently using your identity (a growing problem worldwide)
- A "no" to a credit application, or the supply of goods and services where payment is deferred, does not necessarily mean your credit file is flawed. Credit providers each have their own lending criteria, so seek an explanation
- Remember that the details on overdue accounts, even when paid, remain on your file for five years from the date of listing, as part of your credit history
- An overdue account is usually a debt that has been owing for a minimum of 60 days
- Overdue accounts where the debtor has been "confirmed missing" remain on the database for seven years
What should I do if I have had past credit issues?
- Be honest and upfront. It’s best your lender or mortgage broker finds out from you, not your credit reference, if there are problems with your credit history
- If there has been a problem, explain why it occurred and how you fixed it
- Don’t make too many applications for finance. Each one shows up on your credit report and multiple enquiries can be equated to a problem
- Don’t have any arrears on bills, credit cards or store cards
- If you believe there to be any discrepancies or mistakes on your credit reference you are able to challenge them
- Put yourself in a lender’s shoes and think about what information they’ll be asking you, what evidence you will need to provide, what qualities they’ll be seeking, and what other information you can provide to support your loan application
- Non-conforming lenders will consider applications from people with more serious credit issues. However, they will still expect the borrower to explain the problems that occurred and the steps taken, or being taken to correct them
If you are borrowing money, it is useful to know your personal finances and have a plan for the future. Be able to show your monthly income and expenses, what savings and investments you have, any personal loans and leases, what’s in the bank, on the credit card etc.
The finance market is very competitive. There are literally thousands of options to choose from, so always talk to your broker before making a final decision. If you have any questions we can help you with, please call at any time.
