What you should know about taking on credit
What is my credit rating?
Your credit rating is a file on your credit history and is collated by the major credit reporting agencies if you have ever been credit-active. Your credit rating is then checked by any financial institution or credit provider and is used to assess both the amount you are able to borrow and your ability to repay the loan.
What does ‘credit active’ mean?
Anyone that has borrowed money, or has established an account for services is credit active and will have a file in their name. This includes mobile phone plans, accounts with utility companies, rates accounts and of course loans of any kind.
What is defined as a ‘bad’ credit rating?
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 basic defaults and even too many credit enquiries or applications for credit may be considered to be tarnishes on your credit rating.
How do I know if I have a bad credit rating?
If you are unsure what is on your credit file, it would be worth taking the time to find out.
There are three major credit reporting agencies in Australia: Veda Advantage – which holds the credit file of over 14 million Australians, Dun and Bradstreet and Tasmanian Collection Service.
You can write to or email one of these agencies and request a copy of your file. If you are not in a hurry there is no charge to you but it will take 10 working days from application to receive this information.
What is not realised by many people is how easy it is to have a default slapped on their file. If a bill is more than 60 days late (including rates, power, mobile phones) then a provider has the right to notify you of their intentions to record this default on your credit file. Even if this bill is paid and noted on your file, this default usually remains on your record for 5 years.
I have found defaults on my credit rating, what are the consequences of this?
If you discover you have a bad credit file, you will find it very difficult to obtain credit in the future. Generally this problem will keep occurring for the 5 years the default is on your file. This will probably prevent you from obtaining a home loan with most lenders and possibly lead to credit refusal of many kinds from cards to phone plans.
What can I do to fix my credit rating?
Once you have obtained a report there are three things to consider:
1. Check the accuracy of the report. If there are errors, be aware you do have the right to have errors rectified. Likewise, if there are numerous strange defaults and or applications for credit that you don’t recognise – you would need to immediately investigate these and notify Police in case of identity fraud.
2. Check you were informed of any intention to list. Current legislation requires you to have been informed in writing of any intention from creditors to list you as a defaulting on credit.
3. Check the fairness of the listing. Only serious credit infringements should be recorded, or overdue bills in which 60 days have elapsed since payment was due.
How does My CRA work to repair my credit rating?
In many cases where people have attempted to remove the default themselves, they have come across difficulties and defaults have not been cleared. Most times the creditor will explain to the client that defaults DONT EVER get removed. The best they can do is mark the listing as paid (if it’s been paid). This may not be sufficient to ensure credit is obtained with some lenders.
If you have a default, writ or judgement that has errors or just shouldn’t be there – there is a good chance that My CRA can actually remove it – meaning your financial future is looking a whole lot brighter.
My CRA works with creditors to negotiate on your behalf and work for your best outcome based on the creditor’s compliancy with the current legislation. We will also look at any other extenuating circumstances to determine if there is an avenue we can investigate which results in having the listing removed.
We have had up to a 91.7% success rate with cases we take on. Many credit ratings are cleared within or around 21 working days though some do take longer depending on the difficulty of the case.
Should I try to cut out all credit from now on?
Credit is not all bad. In fact, not having ever taken out credit can harm your chances of obtaining a loan just as much as having a bad credit rating.
However, we do advise you to be cautious with credit. Start small, for instance a mobile phone plan or store credit card. Make all repayments on time and work methodically to build up a solid credit history.
What can I do to maintain a good credit rating?
1. Make all payments on time. This is the easiest way to ensure there are no discrepancies or defaults on your credit file.
If you are unable to make a payment on time, contact the creditor. They may be able to set up a payment plan for you until you get back on your feet.
2. Regularly obtain a copy of your credit file – once a year is recommended.
3. Sign up for Veda Advantage’s Alert system. For approximately $50 per year they can send you a copy of your credit report and email you of any changes made to your credit file within the 12 months of membership.
4. Keep credit card limits within a set budget. Don’t be tempted to accept the sky high limits some banks offer as it could encourage you to spend needlessly and blow out your budget.
5. Be aware of excessive credit enquiries. If you are not sure about your credit health, get it checked before applying for new credit. Declined credit applications on a person’s file can hinder their chances of obtaining a loan. Some lenders are rejecting loans for as little as two enquiries in 30 days, or six enquiries within the year.
6. Don’t shop around for credit. You should only apply for credit you have full intention of pursuing. Every application for credit will be noted on your file, but it does not say whether the application was approved or declined. It could look to creditors like you have been declined multiple times.
Please Note: Our previous results of up to 91.7% have applied only to consumer applications and past results are no indication of future performance