The below information is from Veda, a credit reporting agency in Australia. At Mortgage Advice we believe understanding how your credit works and how you can improve your credit rating can be the difference when applying for future credit needs. Please read the information and if you have any questions please feel free to get in contact.
What affects my credit file?
Typically, as soon as you start applying for credit an enquiry will be recorded on your credit file.
From 12 March 2014 comprehensive credit reporting information can be included as part of your consumer credit information and may affect your credit report. This includes information such as the date an account was opened and closed, credit limit and type of credit account. Repayment history information can also be included and reflects whether you paid the minimum amount required on your financial commitments each month on time or not (licensed credit providers only – this doesn’t include telco and utility companies). If you make credit payments on time each month this will positively impact your credit worthiness.
A number of late repayments as well as a relatively high number of credit enquiries in a short period of time and enquiries that show you have been shopping around for credit can have a negative impact on your credit report.
Other “negative” information can also impact your credit worthiness. This includes:
- Defaulting on loans or bills (otherwise known as overdue debts)
- Court judgements
- Bankruptcy, Part IX or Part X Debt Agreement information
- Court writs
What is a credit rating or credit score?
A credit rating or credit score are used to help lenders decide whether or not to loan money or provide credit and on what basis. A score summarises information on a credit application or credit report into a single number. There are many different types of scores including application scores and bureau scores.
VedaScore is Veda’s bureau score and is a rank ordering tool. It uses only information on credit files held by Veda to predict the likelihood that an adverse event will be recorded on your credit file in the next 12 months. The score alone is not a determinant of whether or not a credit provider will give you credit.
Credit providers have their own lending criteria and the score is just one piece of information they take into consideration when assessing your application.
As credit providers generally have their own lending criteria when assessing applications for credit, one credit provider may approve your application while another may decline it.
How can I improve my credit file?
Your credit file is one of your most valuable assets when it comes to successfully accessing loans and credit — so it’s vital that you understand when information may be added to your credit file and what information is already on your file.
Ways you may be able to improve your credit file include:
- Veda takes reasonable steps to ensure your credit file is accurate and up-to-date, however, sometimes there can be errors in your file so check your credit file regularly and let us know if any corrections are required (e.g. incorrect date of birth, misspelling of name or street address etc.)
- If you believe that information on your file is inaccurate, such as an overdue debt listed by a credit provider or enquiry made by a credit provider, contact the credit provider and seek an investigation
- If you believe that you have been the victim of identity theft contact the police and the fraud departments of the relevant credit providers so that they can investigate
- If you believe that other information is inaccurate, please contact Veda setting out the details of the inaccuracy and we will investigate. Go to the Resolution Centre
- Avoid applying for credit when you are just shopping around for a good deal or you aren’t really sure you need or want the credit. Credit providers may view a relatively high number of enquiries in a short space of time negatively
- Paying your accounts on time -if you are having financial difficulties contact the relevant credit providers to see if you can setup a payment arrangement