A credit report is a detailed summary of all your credit related activities. Any credit accounts you have now or have had in the past, including credit cards, home loans, auto loans and more, are listed in your credit report. The credit report details the balances of these accounts, account history, payment [...]
Credit Report Australia FAQs
Your credit report is the primary deciding factor that a lender will scrutinize when deciding whether to extend credit to you, how much credit to give and what terms and fees to assign to the loan. This is true for car loans, home loans, personal finance loans from banks, credit cards and any other type of credit-related situation. Employers making hiring or promotion decisions may also examine credit, as will property management agencies when you are looking to rent an apartment. Your credit history is very important to so many of the transactions you will make in your life and it is vital that you know all you can about it in order to keep your credit healthy. Here are the answers to the most frequently asked questions about credit, credit reports, loans and what it all means to you.
- What is a credit report?
- What is in a credit report?
- What is the difference between credit reports in Australia and elsewhere?
- Are my current loans and credit cards listed in my credit report?
- What information will lenders enter in my credit report?
- My report says I have defaulted on a loan. What does that mean?
- How do I fix a default?
- What is a clear out and how is it different from a default?
- Who sees my credit report?
- Should I get a copy of my credit report? Is it easy for a non banker to understand?
- How do I fix a mistake on my credit report?
- When do I start generating a credit report?
- Why did the lender turn me down for credit?
- But I’m sure my credit is clean. Why did the lender turn me down?
- How long do negative marks stay on my credit report?
- How do I fix bad credit? Can I mediate bad credit on my file by opening new lines of credit and paying them on time?
- I have a listing on my credit file that is a complete mystery to me. What can I do about it?
A credit report is a document that a lender or other agency can request from the credit bureau or credit reporting company. Lenders use the information in your credit report to determine your credit worthiness. Specifically, a credit report will be used by a bank, mortgage institution or credit card company to determine whether to extend a line of credit to you, and your interest rate, terms and fees. The credit report is a summary of all items that negatively impact your credit rating. Lenders will evaluate these factors, if your report has them, to make decisions on your credit worthiness. Employers and insurance companies also have their own need for credit reports, using them to evaluate your trustworthiness and responsibility.
In Australia, your credit report contains all negative credit information for the past five to seven years. This includes bankruptcies, defaulted accounts, clear outs, late payments, judgments and more. Your credit report also contains personal information such as your full name, date of birth and driver’s license number. It also includes the number of credit enquiries over the past five years. A credit enquiry happens whenever a lender requests a credit report, such as when you apply for credit. Finally, your credit report can also contain supplemental information such as addresses and employment history, but only if these items were ever listed by you on a credit application. There may also be, on rare occasions, information on current accounts. This only happens when a lender decides to furnish this information, which is a rare occurrence.
Australia has stricter privacy laws than in, for example, the United States. In Australia, a credit report only contains transgressions such as bankruptcies and defaults. Even then these transgressions only stay on your credit report for a set period of time – five to seven years. In the U.S., credit reports include all credit activity that borrowers ever have, including all past accounts and current accounts, and the payment history of these accounts. All past addresses are recorded in credit reports in the United States, as well as the borrower’s employment history. In Australia, these details are rarely included in a credit report; they only appear in the occasion that you have listed them on a credit application. Also, credit report data in the United States lasts forever. In Australia, blemishes on the credit report are cleared after a set period of time. Lenders cannot see these transgressions after they have expired.
The difference between Australian and U.S. credit reports can be seen as negotiable, however. The U.S. report can be viewed as the lender having more reasons to deny credit or to be more restrictive. In Australia, lenders have less to go on, so they may be more wary of the limited details they are given.
In Australia, they are not. This may make it somewhat easier to get a loan in Australia, since lenders won’t have much of a look at your current expenditures, which would be a fine factor in deciding whether a borrower can pay an additional bill. The problem is that the lack of information may work against borrowers, making lenders question the data that does show up on a credit report.
If you have entered personal information such as your employer and current address, it’s up to the lender whether they will submit this data to the credit bureau. What they will most definitely submit are any records of credit transgressions. These include late payments, defaults on the loan and clear outs.
A default is a past due account. This usually occurs when a borrower has a debt of $100 or more and has not paid within 60 days. Some accounts, like bills for utilities and telecom, need only be around $20-30 behind in order to be reported to the credit bureau. In order to keep the account from becoming a clear out, the consumer must contact the lender and express their intention to pay the past due amount. After the amount is paid, the lender must report this fact to the credit bureau. A default past due account will remain on a credit report for five years. Too many defaults can easily result in future lenders refusing to extend credit.
Like other transgressions on Australian credit reports, a default cannot typically be taken off a report or mediated. If you have made steps the pay back the past due amount and have verified that the account is paid off, it’s important to obtain a copy of your credit report to verify that the lender has notified the credit bureau that you have paid your default. A paid off default looks much better to future lenders than a late, open account. If the past due amount payoff is not listed, you must contact the credit bureau and the lender immediately to remedy the situation.
A clear out typically starts as a default and gets worse. If you are in default and do not contact the lender and you also avoid their attempts to contact you in order to resolve the issue, the next step is clear out. After the lender has made documented, fruitless attempts to contact a delinquent borrower, then can immediately report the clear out to the credit bureau. Along with bankruptcy, a clear out is the worst blemish you can have on your credit report. It will stay for seven years and will scare off most prospective lenders.
Any lender you approach with an application for credit, except those offering short term “payday loans,” will request a credit check. This includes banks where you apply for personal finance loans for things like education and home improvements, credit card companies, home mortgage lenders and auto loan agencies. These lenders all want to know if you are likely to default on the loan, and they will decide this based on the information in your credit report.
Aside from various banking and lending organizations, others will want a copy of your credit report as well. Your current employer, when making promotion and career advancement decisions, may request a copy of your credit report. Prospective employers may also request a credit check when you apply for jobs. Employers want to know if a current or future worker is responsible and trustworthy, and many see credit as a key indicator of these factors. This is especially true for upper management positions and openings in the financial services industry. For many of the same reasons, insurance companies will also want to check your credit file.
Yes and yes! The very best way to be an informed, savvy consumer is to get a copy of your credit report on a regular basis. You can use it to decide timing when applying for a loan. For example, if you’re thinking of buying a home but are a year or two away from having an old bankruptcy or clear out taken off your record, you may want to wait in order to be in a better position to get a more favourable loan. Only by getting a copy of your credit report would you know this.
Another reason to get a regular look at your credit file is this: banks do make mistakes. When you consider how large banks have become, the sheer number of transactions per day and the automated nature of these transactions, it’s no wonder! Payments can be missed, funds can be misapplied, “default” status can be applied to the wrong account and many other things can happen that can hurt your credit through no fault of your own. If you don’t have a look at your credit report on a regular basis, you may miss these mistakes completely or find out too late. The earlier you can dispute a mistake on your credit report, the better off you’ll be.
The best way to fix mistakes on your credit report is to contact both the lender and the credit reporting agency right away. Get out your chequebook and all other documentation and go over your payment history with the lender. Put complaints in writing and keep all correspondence. While you work on the dispute with the lender, notify the credit reporting agency about the mistake as well, and tell them you are working with the lender to resolve the dispute. Be absolutely sure to get all lender decisions in writing. When they have notified you that they are fixing the mistake, follow up regularly with both the lender and credit bureau until you can definitively verify that the issue has been resolved.
Borrowers start generative a credit report the day they are apply for their very first credit account. Public information such as directorships or proprietorships can also start a credit report. Personal information like your name, sex, date of birth and driver’s license number appear in your newly-established credit report.
Lenders use your credit report to decide how much of a risk you are. Essentially, they want to know if paying back a loan will be a problem. If it has been a problem in the past, they may turn down your application. Bankruptcies, too many late payments, numerous credit enquiries, default and delinquent accounts, and clear outs all have a negative impact on your credit report. Any one of these issues could be enough to make a lender decide it’s too risky to extend credit to you.
This is a case where it’s especially important to get a copy of your credit report. If you are positive you have no black marks like bankruptcy or delinquent accounts, you simply must check your credit file to see what’s wrong. There could be mistakes on the file made by the lender that you will need to dispute right away to get them removed. Even worse, you could be the victim of identity fraud. Thieves could have opened accounts in your name and run up large credit bill they had no intention of paying. This is another example of exactly why you checking your credit regularly is a must.
Black marks will stay on your credit report for five to seven years. The seven year negatives are the big ones: bankruptcy and clear out. These two factors make you look like a huge risk to banks and should be avoided at all costs. Credit enquiries, judgments and defaults will remain on your credit report. These certainly don’t look as bad to lender as bankruptcies and clear outs do, but should still be avoided at all costs.
How do I fix bad credit? Can I mediate bad credit on my file by opening new lines of credit and paying them on time?
This is where Australia’s restriction against reporting current accounts hurts borrowers. In countries where current accounts are all reported, borrowers can work hard to balance out old defaults or bankruptcies with long term current accounts that are being paid responsibly. This can be seen as a way to “fix” bad credit. In Australia, this can’t be done. The only way to repair blemishes on a credit report in Australia is to wait. The only way to have a negative listing taken off of a credit file is if that listing was recorded in error.
Any credit file data that you don’t recognize could be as innocuous as an old default you forgot about or as damaging as credit fraud. The first step is to contact the lender with the listing to get more information. If it’s an old account you overlooked, work with the lender to arrange payment. If it’s definitely fraud, you need to notify the lender in writing that you believe the account is fraudulent, contact the police, and scrutinize your credit report closely right away. Look for any other accounts you don’t recognize, or even accounts with higher balances than you remember. It’s also a good deal to contact your current lenders to verify your balance.