Demystifying credit reports

Feeling reluctant to apply for a loan or credit card because you’re not sure what tales your credit report may tell? You wouldn’t be the only one.

Knowing what’s on your credit report and how it might look to a lender can help banish any unnecessary worries.

Get a copy of your credit report

Australia has several credit reporting agencies that produce the reports. The largest are Veda, Dun and Bradstreet, and Experian.

You can get a free copy of your credit report within 10 business days.

Know what to expect

The information that appears on a credit report includes:-

• personal information such as your name, date of birth, current and previous addresses, and employment;
• applications for credit including joint applications for credit;
• any debts that were unpaid and overdue which have been paid or settled;
• any defaults (a default must be more than $150 and more than 60 days overdue. It could be a utility bill or a loan repayment. A credit provider can only report a default if it has notified you of the outstanding debt and then separately notified you that it may report the debt. A default remains on your credit report for five years); and
• any bankruptcies, court judgements, Part IX debt agreements or personal insolvency agreements in your name.

Since the introduction of a new comprehensive credit reporting system in March 2014 your report can also contain some ‘positive’ information.

If you have a credit card, a car or personal loan, or a mortgage it can show your repayment history for the past 24 months. That includes recording if you paid the minimum repayment on time. To be considered on time it must be paid within 14 days of the due date.

There’s no repayment history information shown for utility or telco bills.

For someone who has had a default listed but has since paid all their loan commitments on time, there’s now a much better picture of your positive financial behaviour available to potential lenders.

Tackle negative information

You may have heard of credit repair services that promise to ‘clean up’ or ‘fix’ credit reports. It’s best to give them a wide berth. Here’s why: they can charge up to $1,000 per listing to get a default removed and, if a default has been correctly listed, it cannot be removed.

If, on the other hand, there has been a mistake – say a credit provider incorrectly listed a default when a payment arrangement was already in place or the same debt has been listed twice – you can get it fixed for free by contacting the credit provider.

Credit reporting agencies such as Veda also offer a free service to investigate mistakes.

Keeping your credit report clean

• Set up direct debits so loan repayments and bills are paid on time.
• If you are having trouble paying a bill or making a repayment contact the credit provider. Making a hardship arrangement can prevent a default listing.
• To avoid having multiple applications for credit on your credit file (it can be read as financial stress by a potential lender), contact your preferred credit provider direct before applying.
• Leaving a share house or ending a relationship? Be careful about leaving any bills or loans/credit cards with your name on it.