Denice R. Preston
Credit scores are a crucial factor in determining your eligibility for a loan, whether you are purchasing a big-ticket item like a home, or a smaller consumer item such as a new smart TV. But it’s not the end of the world if you have bad credit. Companies, including First Rate Car Loans, are specialists in assisting consumers to become successful in a loan application process including securing a car loan. For example, they offer a Bad Credit Car Loan option for consumers with blemished track records.
Finding credit reports online
Firstly, there are plenty of places online to find credit reports for free. Sites such as Check My File or Get Credit Score offer free services, for making the arduous task of credit checks easy for consumers. Such sites offer both free and paid versions of credit reports, ranging from simple to more extensive checks. The more comprehensive paid reports, offer consumers notifications that can detect identity fraud, for example. These are well worth it in the event of such misfortune.
Arm yourself with the right knowledge
The good news is that if you get to know what affects your credit score in the first place, you will have excellent knowledge of how to fix the issues. Read on to discover the factors, which affect credit card scores in Australia in 2015.
How the scores work
The law changed for credit scores in Australia in March 2014 and now Australian consumer credit reports also reflect positive information, as opposed to the negative reporting of prior years.
In brief, a low credit score will reflect a poorer credit history and the opposite is true for good scores. A good credit score ranges between 622 and 1200.
Here’s our guide to how credit is scored in Australia
Negative
Applications for credit
Your Australian credit rating is affected by all the applications you’ve made for credit within the last five years. So if you applied for a loan six months ago and you got knocked back, this will show on your credit score. While creditors look at a wide variety of factors, it is important to note that they don’t like it when they see too many applications for credit over a short period of time. Applications for mortgages, car loans and utilities are all included in this mix.
Note: Be aware that unlocking loan applications at banks while trying to find a home will also count as ‘credit applications.’ This can turn alarm bells on in the banks own system, which seems a double-edged sword, but well worth a mention here.
Paying bills late
While you have to be pretty late paying a bill for it to go on your credit record, be aware that defaults are recorded. Bills that are over $150 and overdue by 60 days plus, can be listed by a company (other than a phone or utility provider) under the Privacy Act 1988.
If a credit provider wishes to list a default, they must send written notice to customers first and warn that a credit reporting body may be engaged. Be aware of SMS, phone and email scams. Never give out personal details or pay ‘supposed’ bad debts requested by collection agencies. If you can’t pay a bill on time, make sure you contact the provider immediately and make arrangements.
Learn more about collection agency scams here.
If you do have the misfortune of a blemish on your credit report, pay the debt and then the credit provider must mark it as ‘paid.’ When applying for credit, this ‘paid’ information may help get you across the line, if other factors look favourable.
First Rate Car Loans can give advice and assist you to get the best possible outcome for your car loan. It is better to use the advice of a professional loan service, than risk being denied a loan, which can ruin your record and your chances of future positive outcomes.
Other negative factors
There are numerous other factors influencing your credit rating from a negative perspective. These include and may not be limited to:
- Bankruptcy or insolvency
- Court judgements and writ of summons
- Public record information, e.g. Company Director information
Positive
You might think that if you have ‘positive’ credit information, this defeats the purpose of a credit score because of course; you will be able to obtain credit!
Instead think of ‘positive’ scores as a way of lifting a poor credit rating up. For example, you might manage payments on your mortgage perfectly, but moved house once in the past, after which you forgot to change addresses and pay a bill. Without you knowing, this may have left a mark on your record.
In this case, your ‘positive’ score would come from the great habits you’ve gotten into with paying your mortgage. This good behavior will effectively ‘lift up’ the poorer score from that pesky house move and resulting default.
This score includes such information as to what type of credit accounts you hold such as home loans or credit cards. Your credit score will also show when you opened and closed accounts, details of credit providers, account limits and usage – as well as repayment history.
Tips for achieving better credit scores in the future:
- Research the best lenders for your situation
- For mortgages use brokers who know the best deals for you
- Get into the habit of paying bills on time every time
- Make sure all debts are paid well within 60 days
- Pay little amounts into normal debts over time to keep your record looking current and good
- Use direct debits and scheduled payments to make sure you pay your bills on time
- Always call providers if you can’t pay a bill and make payment arrangements
- Consider a mortgage offset account from which all debts and bills get paid – you’ll reap the benefits in paying less interest on your home loan
- If there’s a mistake on your file, contact the Privacy Commissioner
- Sign up to a credit reporting service and get automated notifications sent every quarter or year
Final thoughts
Start showing that you can manage debt and credit, and in a diverse way by leveraging different types of credit across your life. For example, take out a car loan, use a credit card for groceries and miscellaneous spending and make regular payments into a home mortgage.
Also think outside the square. Consider keeping accounts you don’t use much open. If there’s no negative action on them over time, this still counts as a positive. Just make sure you keep the accounts in credit!
