Concerned Australians focusing on saving and reducing debt in the wake of the GFC, are overlooking how maintaining a clear credit file can be a simple way of making significant household savings, according to a national credit repairer.
Director of MyCRA Credit Repairs, Graham Doessel says people eager to save are busy reducing debt and going without life’s luxuries, but in the process are overlooking a key way they can save themselves thousands.
“A clear credit file allows consumers to shop for the best credit at the lowest interest rate. For instance, on a $400,000 home loan, those with a bad credit rating are potentially slugged around $550 extra per month in interest when comparing a non-conforming loan with a loan at a current standard variable rate,” Mr Doessel says.
He says if people have a bad credit rating, it sticks for 5 to 7 years, and they are most times shut out of credit with the major banks for this period.
“Unfortunately those people with a bad credit rating will generally be refused credit by mainstream lenders and funnelled into higher interest rate loans and cards which only seem to perpetuate the debt cycle for the very people who would benefit from saving money,” Mr Doessel says.
Current information from the Australian Bureau of Statistics on household savings show for the first time since 2003, household savings have dramatically increased. The ABS revealed in March 2011 the saving ratio rose to 10.1% in seasonally adjusted terms in the September quarter 2010.
Mr Doessel says many of his credit repair clients are in a better financial position than they have been in years for loan qualification, but are held back from taking advantage of competitive interest rates and stable house prices by black marks on their credit rating.
“Many clients have everything in place for obtaining loans, until they apply for credit with a lender and are knocked back due to credit rating defaults they were previously unaware of – and often those defaults should not be there,” he says.
He says the best way people can prevent this scenario is to get familiar with their credit file and the ways their good name can be compromised. He provides 6 tips for being credit file savvy:
1. Make repayments on time. Any bills which are more than 60 days in arrears can be listed by the creditor as defaults on a person’s credit file. This includes home loans all the way through to phone and power bills.
2. Dispute bills correctly. Many people find themselves with a bad credit rating following bill disputs with creditors such as phone and power companies. Many people are unaware that regardless of whether the bill has been disputed by the customer, if it is more than 60 days late the creditor will generally still list the non-payment as a default on the customer’s credit rating – whether the customer believes the amount is accurate or not. To avoid a bad credit rating when disputing bills, people should pay the bill by the due date and attempt to recover the money from the credit provider afterwards.
3. Ensure the accuracy of your credit file. All credit active individuals are entitled to a free yearly credit file check from all the credit reporting agencies that may hold a file on them. People should take advantage of this, and ensure there are no errors on their credit file. Mistakes can and do occur on credit files. If there are inconsistencies, people do have the right to have them rectified.
4. Educate yourself on identity theft. Identity theft is the fastest growing crime in Australia, and it can potentially ruin a person’s good credit rating. Typically, the fraudster extracts personal details from the victim and goes about obtaining credit under their name. Often the victim is not aware of the fraud until they attempt to obtain credit and are refused. Fraudsters have taken out credit cards, racked up thousands of dollars of debt, and in some cases have taken out mortgages in their victims’ names.
The best way to prevent identity theft is to be aware of how it can occur. The Government’s SCAMwatch website www.scamwatch.gov.au is a great place to start getting educated on what to watch out for. For help with preventing online identity theft, the Government’s Stay Smart Online www.staysmartonline.gov.au website also offers ways to combat identity theft through internet use.
5. Beware excess credit enquiries. Every time a person other than the credit file holder makes an enquiry on the credit file, this entry is noted. Unfortunately the credit file doesn’t show the nature of the enquiry, or whether the credit was approved or declined. Generally excess credit enquiries on the credit file will also hinder people’s chances of obtaining the best loan.
People can avoid this by not shopping around for credit, or by ensuring that all banks/brokers they deal with do not run a credit check on them until absolutely necessary. Potential borrowers can obtain a copy of their own credit file without incurring a credit enquiry, and this may be a better option to maintain a clear credit rating.
6. Keep credit limits to the minimum needed. Reducing credit limits not only prevents overspending – it is also beneficial for a person’s credit rating. Credit limits are recorded on all credit that has been taken out by the credit file holder. This amount shows on a person’s credit file, not the amount they have actually used. People should reduce lofty credit limits closer to the actual debt amount.
Mr Doessel says all credit active individuals will benefit from educating themselves on credit reporting in Australia, and for those that discover inaccuracies on their credit file they will save themselves money by having them removed.
“People can greatly benefit from clearing their credit file of errors. Sometimes people have neither the time, nor knowledge of legislation that is required to deal with creditors, and in this instance a credit repairer can do the work for them,” he says.
Lisa Brewster – Media Relations Mob: 0450 554 007 firstname.lastname@example.org
Graham Doessel – Director 07 3124 7133
Credit Repairs is Australia’s leader in credit rating repairs. We permanently remove defaults from credit files.