As a young person, you should be extra vigilant with your credit file.
Generation Y is responsible for more than one third of Australia’s total consumer credit defaults, despite making up 20% of the entire credit active population. Gen Y also has more personal loan and telecommunication defaults than any other generation, relative to population size. (Statistics from Veda Advantage)
The system of credit we have is eager to suck people in but shows no remorse for people who fall off track. Young people have got to be wise and ensure they are making credit work for them, not letting it beat them.
Your credit file lists personal details like name and address, but also any times you have applied for credit, any defaults (overdue accounts), court judgements, writs and bankruptcies.
Many young people don’t realise how easy it can be to end up with a bad credit rating.
Here are some of the typical situations where you can find yourself with a black mark against your name:
Unpaid accounts: Any credit accounts or loans – including mobile phones and electricity that run over the due date are considered unpaid accounts. If they are not paid by the due date, creditors will make a note of it. If the account is not settled within 60 days from the due date, creditors can list this unpaid account or loan on your credit file as a default.
Moving/traveling: If you move around a lot, the danger can be ending up with defaults on your credit rating due to unpaid accounts you were not aware of. Typically an account gets sent to your previous address and remains unpaid and then listed as such on your credit file. Consider a P.O. Box for all your mail or alternatively a parent’s address.
Share accommodation: Any accounts which have your name on them, regardless of who intends to pay them are your responsibility – this includes rent. Sometimes people get caught out sharing houses, and someone leaves bills unpaid which then have dire consequences for your future.
Identity fraud: Young people are increasingly victims of identity theft – and often it is someone they know. Typically, someone uses your identity to secure credit in their name – mobile phone accounts, credit cards, store credit – in some cases even mortgages. See our website for more information on identity theft and how it could affect you.
To avoid the disappointment and embarrassment of finding out about your bad credit rating only after being declined credit, MY CRA recommend you check your credit file every 6-12 months to ensure there are no black marks against your name, just as you would check your bank statements or your super account.
You can request a copy of your credit file for free from the major credit reporting agencies – Veda Advantage, Dun & Bradstreet or Tasmanian Collection Services (if you are Tasmanian). This will be provided within 10 working days – or for a fee it can be provided urgently.
The consequences of a bad credit rating:
A bad credit rating sticks. Many times you will find you are black listed from credit for a five year period following a default on your record. Even having too many credit enquiries or a default from a simple unpaid phone bill can be enough to be refused a home loan with most lenders in the current economic climate.
Think of everything you want to achieve in the next five years. Maybe you would like to buy property, start a business, buy a motor vehicle, borrow money for travel, or even just take out a credit card. The chances of you being able to do this are greatly hindered with a bad credit rating.
A clear and healthy credit file really is the ticket to financial freedom.
How to repair your credit rating:
If a credit file check does uncover some nasty surprises – it could be possible to repair the damage done by contacting MY CRA.
If a default, writs or judgements has errors, has been entered unfairly, unjustly or just shouldn’t be there at all, we can help to remove the offending black mark and clear the file – something which you could find very difficult to do on your own.
Most times a credit reporting agency will tell you that defaults are never removed, but can be marked as paid. You are then stuck with a dodgy credit rating for 5 years. But you shouldn’t have to put up with it, as it is possible to have many defaults removed.
MY CRA has a 91.7% success rate in removing defaults on every case we take on. Usually the turn around is 21 working days though some can be longer depending on the difficulty of the case.
But, prevention really is better, and cheaper than the cure.
Credit reporting agency Veda Advantage suggests some further ways for young Australians to keep their credit rating clean:
• Pay bills on time.
• If people are having trouble paying, they should contact the organisation they owe money to, It may be possible to set up a payment extension system if people are honest about their situation. It is often the failure to respond to a bill or notify a business of your intention to pay that causes them to proceed to default stage.
• Don’t take submitting credit applications lightly. Current legislation in place means organisations running credit checks can’t see whether or not an application was successful – all they can see are the number of applications.
• Consider pre-paid mobile phone services.
• Keep addresses and other details accurate and up to date to ensure credit providers are sending notices to the correct address.