Bad credit is common,  affecting millions of Australians and sometimes it goes undetected until your loan is DECLINED.

This ‘surprise bad credit’ can see you declined on a home loan application. We show how it may have happened, and give you 7 steps to fix a bad credit report.

By Graham Doessel, Founder and CEO of MyCRA Lawyers & Credit Rating Repairs and www.fixmybadcredit.com.au.

Applying for finance for a home can be nerve-wracking. There’s the deposit – have I saved enough? There’s your income – do I earn enough? There’s the home – have I paid the right price?

When all of these factors combine to give you, on the face of it, a good chance of approval for finance then there’s the issue of choosing the right home loan, at the right rate, with the right factors for your future. So you go through all of these sometimes stressful aspects of property buying, and you make the official application for finance with your chosen lender. It all looks good…

Until you are slapped in the face with an APPLICATION DECLINED. You should qualify for a home loan, but you don’t because your credit report shows up with a default.

You have no idea what the default is for…you always pay your bills on time…but that little default from what looks like a utility company, is messing with your future and caused the decline.

How can they refuse me a home loan based on this, you ask? They can, and they do. You see, a default is an account in arrears greater than 60 days.

If you have a default on your credit file, it tells the lender that you don’t pay your bills on time. They have a responsibility to ensure you can manage the debt you will accrue. This is evidence that you can’t manage your debts, you look like a risk to them, so they refuse you the loan, despite all the other factors being in your favour.

What Do I Do Now?

Now you know you have bad credit, you have two options. You can wait for 5 years. A default remains on your credit file for 5 years from the time it was listed, and after this time it ‘drops off’ your credit report. It will impact your ability to obtain credit generally for the entire time it is listed on your credit file. So – for 5 years you will have a hard time getting anything other than a credit decline anywhere, from mortgages to car loans to credit cards and even mobile phone plans.

If you don’t want to wait, you can investigate whether it should be there at all.

Mistakes can and do happen. Mistakes in credit reporting are most times only picked up by the credit file holder, so if you think there is something amiss with your credit file it is up to you to put it right.

Here are the steps you need to take to correct errors on your credit file:

7 Steps to Fixing Credit Reports

1. Determine what account the default is for.

If you don’t have a copy of your credit report, you will need to order one. If you haven’t ordered a copy of your credit file in the last 12 months, it will be free from the credit reporting agencies in Australia. They are Equifax (Formerly Veda Advantage), Dun & Bradstreet, and Tasmanian Collection Service (if in Tasmania). You may have listings with one or all of these credit reporting agencies. They will take 10 working days to send you a copy of your report. For a small fee, you can have one sent to you urgently.

On your credit file, will be the company the default is with, and an account number. This should correspond with an account you have with them. If it doesn’t, or if you don’t have any accounts with the company in question, there is a good chance there may be a mistake on your credit file.

2. Gather all your information first, and try and determine how the default got on your credit file.

Before you call the company in question, sort out what you know about the situation. Have they made a mistake? How have they made it?

4. Write to the Creditor to ask for information on the account.

You may need to find out more about how the default got there. Every company keeps a record of its customers and you can write to them and request your account records to date.

5. Decide on how you’re going to tackle them.

Now you want to try and negotiate for the Creditor to remove your default. Don’t go in guns blazing – bear in mind, there is nothing to say they have to remove the default. Want you want to do is encourage them to do the right thing by you.

6. It is going to be hard going.

Most people find it really hard to correct their credit listing themselves –especially if it’s complicated. For one, the Creditor has to comply with a whole heap of legislation that crosses different codes, and if you don’t know legally where they may have made errors – it’s pretty hard to persuade them they have done the wrong thing. And who’s got time to learn all of that?

Secondly, negotiating anything on your own behalf can be tricky – the old foot in the mouth routine can get you into trouble and see you stuck with the listing for the whole term. In reality, many people trying to fix their own credit rating get told they can have the listing marked as paid, but it is never removed. This is not enough to guarantee you the home loan. If you were able to show cause as to why the listing was put on your credit file unlawfully, there is a chance it will actually be removed.

7. Consider getting a professional on board.

For a pain-free approach – at any time, you can hire the services of a credit repair professional law firm. Most of them will look after getting a free copy of your credit file for you, order your documents from the Creditor as well as directly negotiate with them to remove your bad credit, based on the relevant legislation applicable to your case.  And most importantly, they will probably think of things you had never thought of to strengthen your case for the default removal. This is your best chance at getting the listing removed completely from your credit file, which will allow you to apply for finance with a mainstream lender again… Without the DECLINE!

If you’ve done the crime, you may need to do the time

If you’re a serial offender for late payments, if you are currently struggling to keep your head above water, then new credit- especially major credit such as a mortgage- is NOT going to make it all better. We don’t advocate wiping the slate clean because of a technicality, and contributing to your fall from grace once again when you default on your home loan. The credit reporting system was designed for you, to stop you from getting in way over your head and maybe 5 years without credit is a good time to learn some financial strategies for the future. This is where a decline can actually be helpful.

But, if you firmly believe you are capable of making repayments on this home, if you know that the listing was put there unfairly, or perhaps even if the listing was accrued because you had a period of financial stress you have now recovered from and you weren’t helped in the appropriate ways at the time, then you may have a case for removing the default. If you are unsure, you can always talk to MyCRA Lawyers on 1300 667 218, who can make an assessment for you on your suitability for credit repair.

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