Refinancing numbers are at a record high. But any home owner looking to refinance needs to consider they could have surprise bad credit history. Before you apply for a new loan, it is important to check your credit history prior to making any finance application, even if you think your repayment history is impeccable.

By Graham Doessel, founder and CEO of MyCRA Credit Repairs and www.fixmybadcredit.com.au.

Australian Broker reported Tuesday on figures coming through from AFG showing figures for refinancing have gone through the roof in the past 12 months, with two in five loans now refinancing:

Refinancing outweighed all other loans on AFG’s Mortgage Index at 39.1 per cent for June.

Mark Hewitt, general manager of sales and operations at AFG attributed the growth to a more competitive market.

“Refinancing is very strong as borrowers take advantage of a more competitive market to secure a better deal,” he said.
AFG also said fixed rate loans fell to 16.5 per cent – a significant decrease from March’s peak of 25.4 per cent.

“It’s significant that, as we begin a new financial year, the vast majority of borrowers are opting not to lock in an interest rate. Most see a period of stable or even softer rates for the foreseeable future.”

Before refinancing

Prior to making a re-financing application, you should order of free copy of your credit report – in case your credit history contains inconsistencies you aren’t aware of. For some home owners, it can be years since you applied for major credit, who knows what information is present on your credit file?

Under current credit reporting legislation, you are entitled to obtain a free copy of your credit report from the credit reporting agencies once a year. A person requesting their own credit report does not generate a ‘credit enquiry’ on their credit file so it is important to do this prior to putting in the application. If a credit enquiry from a lender finds a default against your name, warranted or not, you will be refused finance. That lender’s ‘enquiry’ now shows up on the credit file for 5 years along with the default, creating two negative entries instead of one.

You need to contact all the credit reporting agencies to request your credit report – as creditors have access to 2 main agencies within mainland Australia and 3 if in Tasmania. The report will be sent to you within 10 days of the request.

Regardless of whether you have been diligent with paying bills, creditors can and do sometimes make mistakes with credit files, which can leave you with black marks against your name that just shouldn’t be there.

Sometimes you may not know your good name is compromised until you apply for finance or in this case re-finance and are refused.

What is bad credit?

A bad credit rating can result often due to unpaid accounts. When a bill or repayment goes unpaid past 60 days, it is listed as a default or a ‘clear-out’ on your credit file. In the current finance market, any black mark generally results in an automatic decline with the major lenders, as does too many credit enquiries.

So how many credit files contain errors? The volume of credit file errors on Australian credit files is uncertain.

A spokesperson from credit reporting agency, Veda Advantage estimated 1% of the 250,000 credit reports they give out as a credit reporting agency to Australians every year contain a material error on the credit file.

But the Australian Consumer Association (now Choice) survey from 2004 revealed that 34% of the credit files surveyed in their small scale study contained errors or inconsistencies.

And the real numbers? They may be somewhere in between.

Approximately 63% of the clients who request credit repair have defaults, writs or Judgments which are listed in error on their credit file.

We have clients who are facing identity theft; some are caught in issues over separation from their spouse; some have been disputing the bill which went to default stage and many people are just victims of the fallout from inadequate billing procedures – wrong names, wrong addresses, human and computer errors.

Listings are not removed by creditors unless you can provide adequate reason and lots of evidence as to why the listing should not be there.

Credit repair requires knowledge of the legislation, lots of evidence and perseverance. But if your financial freedom is hindered because your credit file contains errors, it is a point worth fighting for.

Contact MyCRA for help with getting a free copy of your credit file, or for help with credit repair on 1300 667 218 or our main site: www.mycra.com.au.

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