Our credit file is like a mirror on our finances. How healthy are you looking? Here’s a back to basics look at the ins and outs of taking on credit in Australia, and why it’s important to look your best when applying for credit by having a clean credit history.

By Graham Doessel, Founder and CEO of MyCRA Lawyers and www.fixmybadcredit.com.au.

When you apply for credit, the lender will, after assessing your savings history, your income and your debts – order a credit check on you. This involves contacting one or more of Australia’s credit reporting agencies, to order a credit report from your credit file.

What the lender sees on your credit file can reflect your assets, your good history, but it can also reveal your financial shortcomings. It can be a reflection of your inability to stick with something, your disregard for repayments, or the financial potholes that are sometimes impossible to climb out of. Let’s look at what a lender might see about you on your credit file, and how you can make sure it looks squeaky clean.

Your Credit File

Is a collation of your credit history. As soon as you become credit active, you have a file opened in your name. This file is then attached to you as long as you apply, use and unfortunately abuse credit – it will follow you everywhere in Australia.

If you have applied to borrow money, or have established an account for services you are considered credit active.

Every creditor inputs information about you to one or more of the credit reporting agencies in Australasia. Australia’s CRA’S include: Equifax (Formerly Veda Advantage), Dun & Bradstreet, Experian & Tasmanian Collection Services (TASCOL) if in Tasmania.

What a credit file contains

– Your credit file includes identity information – such as your full name, date of birth, gender, driver’s licence details, addresses and employer information.

It also includes other information about your credit and repayment of credit history:

-Any current active credit and details of current credit providers, for instance mortgages, personal loans and credit cards.
– Any overdue credit accounts – these may be reported as either a ‘payment default’ or a ‘clearout’.

How long will I have bad credit?

Credit Reporting Body Equifax reports these time periods for holding information on your credit file:

How long is the information held on my credit file?
• Credit applications and enquiries and overdue accounts are held on your file for five years
• Overdue accounts listed as a payment default are held for five years
• Overdue accounts listed as a Clearout are held for seven years
• Bankruptcy Act Information is held on your file for seven years (prior to January 1998, Bankruptcy Act Information was held for five years)
• Court Judgments are held for five years
• Writs & Summons are held for four years
• Identity information, which includes name, date of birth, sex, drivers license, address history, and linked names (if any) are held for the life of the credit file. This information is used to distinguish the credit file from others held in the database
• Purge dates are calculated on the date the information was added to the file, and are based on the time limits provided in the Privacy Act 1988
• Files are scanned each month and out of date information is automatically purged to ensure the files are accurate.

NB: Even when an overdue account or clearout has been brought up to date or paid in full, it will not be removed from your file.

All payment default listings remain on file for five years from the date of listing. All clearout listings remain on file for seven years. The fact that an account has become overdue, and then been paid becomes part of your credit history.

Your credit report

As the credit file holder, you are legally able to obtain a copy of your credit report for free from all of the credit reporting agencies in Australia every 12 months – and a written copy of your credit file will be provided within 10 days from your written request.

Every credit active person should obtain a copy of their credit report annually  – regardless of whether or not they think they have a bad credit rating. It is important that when checking your credit file, you obtain reports from all possible credit reporting agencies.

Definition of a ‘bad’ credit rating

If you don’t already know you have bad credit, you would be notified at the time of credit application, when the credit provider obtains a copy of your credit file.

In broad terms, any credit defaults, court actions or writs, external administrations and bankruptcy are all recorded on your credit file and would be considered ‘bad’ credit history by most credit providers.

In this current economic climate even too many credit applications are often considered to be ‘black marks’ on your credit file.

Impact of a bad credit rating

If you discover you have a negative listing on your credit file, you will find it very difficult to obtain mainstream credit in the future, generally for the term of the listing (5 -7 years).

You will likely be refused a home loan with most lenders and possibly be refused credit of many kinds from credit cards to phone plans right through the term of the listing.

Too many credit enquiries on your credit file may also stop you from getting major credit with most lenders.

Most times the loan options available to bad credit clients are at significantly higher interest rates in order to cover the risks associated with taking on someone with bad credit.

Can you change what is said about you on your credit report?

It depends if the information on your credit report is accurate or not. If your address or other personal details are inaccurate, you may want to contact the credit reporting agencies to have this rectified. But you should also consider why. Do you think it’s possible that there are inconsistencies on your report? If you also have defaults or other credit listings which you feel shouldn’t be there, you should pursue the matter through making a claim with the Creditor to dispute and remove any listings which should not be there.

Any credit listings which you feel are unfair, incorrect or just shouldn’t be there should be addressed well before you need to apply for credit. The impact of bad credit is pretty severe – and can haunt you for a long time. Spend the time to make sure everything is correct on your credit report.

You may only get one chance at clearing your credit file – so it’s important to give yourself the best chance of having any inconsistencies removed from your report by using a professional credit repairer.

Sometimes individuals can attempt to deal with creditors to remove the credit rating default themselves and can do more harm than good by not understanding the legislation.

Credit repair is a lengthy process, involving the review of all documentation from an individual – including the credit file and all the circumstances surrounding the default, writ or Judgment.

Then the credit repairer negotiates with the creditor who initiated the listing on your behalf to remove the default.
This can also often involve lengthy requests and submissions of documentation until an agreement is reached by the creditor and the repairer to remove the offending black mark.

Not every credit file is suitable for credit repair. The credit repair company can review your situation and determine whether your case is worthy of pursuing.

For advice about whether your adverse listing may be suitable for credit repair, contact a Credit Repair Advisor on 1300 667 218 or visit our website for more information www.mycralawyers.com.au.

Once your credit file is restored and your bad credit is removed, you will be looking great to the lender, and ultimately feeling great when you have access to the best credit you can, at the best rates.

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