Just about everything we do can be reduced to a number!
Your credit file is one of your most important financial assets. Safeguarding the information on your file is an important part of the finance application process as lenders request a credit report on each applicant when they apply for finance.
The Privacy Act was amended in December 2013 to allow financial institutions to share your credit liability and repayment history including whether your payments have been made on time or not. All of this information will eventually be held in your credit file and is used to calculate a credit score (sometimes referred to as a credit rating). The exact formula used is a closely guarded secret (much like the 11 herbs and spices).
Credit scoring is a mathematical assessment of the data included in your credit report, this shows the likelihood of your defaulting on credit payments within the next 24 months. While the score range may vary between credit agencies, as a general rule scores range from 0 to 1,200.
Did you know that a score of less than 500 will severely affect your ability to gain finance from many lenders?
To boost your rating you can:
1) Pay your bills on time!
2) Limit the number of credit applications if shopping around
I didn’t realise that was recorded on my credit report?
We recently helped a young male purchase his first house. He has an excellent savings history, no debt or commitments and has always paid his bills on time. His application was submitted and declined outright due to a due to a large mobile phone default with a provider he had never dealt with. As it turned out someone had stolen his identity and used it to apply for a phone plan.
He was successful with having the listing removed but it took nearly four weeks which is not great if you have found a dream home and have five days cooling off before you have to sign the contract. If the default was his, he would still be able to obtain finance but at a cost with large set up fees and a higher interest rate.
Problem – Purchases are time sensitive – you need to act fast otherwise you can lose the property!!
We encourage all of our clients to obtain a FREE credit check prior to applying for finance. This will ensure any notations can be discussed or resolved upfront and allows the lender to be notified with an explanation. You can obtain a free credit check (one each year) by logging onto veda.com.au It is suggested that you regularly check your credit file and to reduce the risk of identity theft, make sure any information that contains your personal details is destroyed in a secure manner.
So, be conscious of the importance of your credit report and make sure you meet all of your credit obligations on time.
Start your journey today, contact us for fact sheets or more information. Let us help you make your dream a reality!