As of 1^st July 2018, under Comprehensive Credit Reporting (CCR) it is mandatory for credit providers to provide positive credit data to credit reporting agencies.  Prior to July 2018, credit reporting agencies only obtained negative data such as defaults with utility providers, bankruptcies, and court judgements in order to compile your credit report, and determine your credit score.  CCR will ensure that additional information such as the type of credit applied for, amount of credit applied for and repayment history for the last two years will be included in your credit report.

Lenders use your credit score to assist in the assessment of a loan application or credit card.  Your credit score will help a lender decide the potential risk of lending to an applicant, and the likelihood of being repaid on time based on your credit history.   The higher the score, the better the credit risk you are to a provider.

Some of the key factors that impact your credit score include:

• Your total debt.
• Personal details.  Your score will take into account your age, time at current address and length of employment.
• Types/size of credit accounts and relationships, eg. Home loan, personal loan or credit card.  Mortgages have a different level of risk when compared to a credit card.
• If you have credit relationships with specialty finance providers such as debt collection agencies or payday lenders.
• The date your credit file was established.  A newer file may present a higher level of risk when compared to an older file.
• The number of credit enquiries made on your file.  This may have an impact on your score as credit enquiries remain on your file for up to 5 years.  If you’ve shopped around for credit and applied with several providers, you are seen as a higher risk.
• Late payments, defaults, serious credit infringements, court judgements and bankruptcies.

There are a number of ways you may be able to improve your credit score:

• Firstly, obtain a copy of your credit score.  You may be able to get a copy by opening an account via several providers such as:
  • www.finder.com.au/credit-score/verify
  • www.creditsavvy.com.au
  • www.mycreditfile.com.au
  • www.checkyourcredit.com.au
  • www.experian.com.au
• Once you have obtained the score, check which range your credit score falls under.  Typically your score will range from below average to excellent.  If you have a low score, consider reducing your credit card limits, and check for any incorrect negative listings.  You may be able to apply to remove an incorrect negative listing from your credit file.
• If you have multiple personal loans &/or credit cards, consider consolidating the debt under one loan.
• If you have overdue accounts >$150, pay them off as soon as possible.
• Limit the number of credit applications you make.
• Ensure that your loan repayments are always made on time.

Checking your score and getting your finances back on track will be an important step to improving your chances of being approved for a loan.  If you have a low credit score and you are looking to borrow, a rejected application will further reduce your score.

Please note this article provides general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored credit advice, please contact us today for a confidential, cost and obligation free discussion about your lending needs.  We would also be happy for you to refer your family or friends so we can also assist them to locate a cost-effective home loan which suits their needs.