Your credit file is one of the most important things you will ever own. It is the most universally important piece of information about you that the financial world has, and it’s one of the most mysterious for the normal person, because most of us have never even seen it. Education in this area of people’s lives is often only done once they have been declined for a loan or other form of credit, which is, in part, too late. But having good habits is one of the keys and setting aside any “she’ll be right, mate” attitude you might have towards any obligations you have, including loans, phones or utilities bills, will likely help to keep things clear.
In short, if you have fallen behind on bills or repayments, and the supplier or lender has tried without success to get payment, they may have the legal right to list a default on your credit report. This will stay on your report for a minimum of five years, unless you moved or otherwise became uncontactable, in which case the default is termed a ‘clearout’ and it will stay there for seven years. Defaults will remain on the credit file whether they’re paid or not, but when possible, it’s always advisable to pay it, as the lodging of the default by the company does not stop them from pursuing you for the money and much stronger legal action can still be taken.
Besides keeping track of all your obligations and paying them on time, there are other ways to ensure that your credit file remains attractive to lenders. One is to avoid making unnecessary or uninformed enquiries for credit. People often just apply at a range of lenders hoping that one of them will approve it, but it doesn’t work this way, as many lenders have limits to the number of enquiries on a file that they’ll allow, and any enquiry may need to be explained. Once you’ve applied, the first lender will check your file, so the second lender sees that enquiry when they check the file, and so on, with some lenders declining for this almost automatically. Properly informing yourself about the lender’s policy and then applying only if you meet that policy will likely see each application count for more.
Also, the types of lenders you use is important, as pay day and short term loans are not often looked upon favourably by lenders as they are commonly last resort types of loans. This can often indicate that you haven’t been able to use normal lending channels, so, according to the bank, you might have less than desirable habits with either repayments, employment or residence stability.
If you have a default which you believe was listed in error, your first step is to speak with the company who listed it. This can see results straight away as they can actually have the default removed totally from your report. If they do not want to do that, the relevant Ombudsman’s Office can be contacted and they can speak to the company. Failing this, there are solicitors who will work for you on a ‘no win – no fee’ basis. If you are stuck with the default – don’t despair – there are a range of lenders who can help in this situation, and some even have attractive rates and terms.
The final piece of advice is a very important one – Don’t fall into the trap of letting a finance broker ‘check’ your report, as that will show as an enquiry and may reduce your ability to borrow, plus they may charge you for the privilege. Instead, if you are going to apply for a loan and are not sure how your credit file looks, you can get a copy yourself from www.mycredifile.com.au. This does not show as another enquiry on your report and you can get it for free.