Have you heard the terms “credit score” or “credit report”? If you’re an adult, there’s a good chance that you’ve heard one or both of these terms at one time or another. Unfortunately, one of the first times people hear these terms is when they find out that they don’t qualify for a home loan, car loan, or some other type of financial product because their score or report is not all that great.
There is some good news to share though…the government has released some changes into place that helps the consumer when it comes to credit reports and scores. The changes have created comprehensive credit reports and scores, which can affect a person’s score and/or report in a more positive way, but there’s a catch! The catch is that comprehensive credit reports and scores will only really help if you pay your bills on time.
Why do you need a good credit report/score? When you go to buy a home, a car, or apply for a credit card, the banks check your report and score. They do this to help them determine if you’re responsible at paying your debts on time. People with lower scores tend to have not so stellar payment histories with their current or previous lenders, which can make a bank or credit lender think twice about providing you with credit, which may lead to a denial of credit altogether.
There are 3 main credit reporting agencies in Australia and they all report pretty much the same basic information about you and your financial history, such as:
- Name, gender, date of birth
- Current and previous addresses (2)
- Current employer, or last known if current is unavailable
- Your driver’s licence number
- Defaults on payments or bankruptcies
- Any business names held
- How many times lenders have enquired on your credit report
- Listing of all accounts you currently have
- Bills that are overdue by 60 days or more and have a balance of $150 or more
The new credit reports will be a little more detailed, such as including repayment history for cars, homes and personal loans, whether you make your minimum payments, whether your payments were on time, the credit accounts you have, when your credit accounts were opened and closed, the names of credit providers, the current limits on your accounts.
Including this additional information can help consumers who do a good job of paying their bills on time, but for those who have missed payments, late payments, or do not make the minimum payments required, it can hurt your report, your score, and chances of being approved by a bank or lender for other loans.
It’s imperative that if you want a good score and report, that bills need to paid on time. Even if you have a few mistakes on your report, but you’ve paid on time consistently for a good while now, your credit history will start improving.
If you find that you’re in too much debt and you’re not sure what to do, contacting a qualified financial planner is a great place to start.