The ins and outs of credit scores

The ins and outs of your personal credit report

Understanding the ins and outs of your personal credit report will help you with your home loan application.

You may not be aware of what your personal credit report is, but it is an important file when it comes to applying for a home loan.

We’re clearing the waters about the murky topic of personal credit reports so that you have the best chance of your loan being approved.

What is your credit report?

Your credit report is a summary of your credit history, including any loans, credit cards, phone plans, store accounts, interest free plans that you have applied for and any contractual payments, such as bills, that you may have missed. These items are what make up your credit score and may affect your eligibility to have a loan approved.

Where can you find your credit report?

In Australia, there are three credit reporting agencies: Veda, Dun & Bradstreet and Experian. If you wish to get a copy of your credit report, you must apply directly with one of the agencies and provide your full name, address, date of birth, previous address and driver’s license number.

Fortunately, you can obtain a free copy of your credit report once a year, or if you have applied for a loan in the past 90 days, even if this loan request was refused.

What can hurt your credit report?

Beyond the obvious, such as defaulting on a loan payment, there are a number of other factors that can negatively affect your credit score. These include:

  • Not paying your utility bills or council rates. According to the Privacy Act 1988, any overdue amount that is over $150 and more than 60 days late will be listed on your credit report. This can become a cause for concern and can be listed as a serious credit infringement if it is left unpaid, and may lead to legal action being taken.
  • Not paying the minimum monthly balance on your credit cards. A one-off late payment will not seriously affect your score. If, however, your late payments become a trend this often signifies to lenders that you are an undesirable loan candidate.
  • Applying for multiple loans. Every time you apply for credit it is listed in your credit report. If you have applied for multiple types of loans from many different providers in a short space of time, a potential lender may see a red flag.
  • Having been refused credit and continuing to apply for loans. If lenders see this in your history and have also noted other red flags, they may feel that there will be further declined loan applications in your future.
  • Forgetting to update your personal details. You might not have intentionally missed a payment at all; however, if your bills, for instance, are not redirected when you move, they can go unnoticed.
  • Default payments for not meeting your financial contractual obligations when they have fallen due.

It’s easier to help maintain your score or even improve it when you’re armed with the knowledge of what makes up your credit report. Take control of your credit report by running a free credit check on your file. This will help you keep tabs on your credit position so you will be able to apply for credit without worrying about what your report says.