Under Australia’s new comprehensive credit reporting system, licensed credit providers can access information about your credit history. The idea is that this information will help lenders make more informed decisions, but the downside for borrowers is that it can make it harder to get credit.
So, what’s changed? In the past, lenders could consult your credit history to see if you had applied for credit for personal or business reasons, but it would not have recorded whether you were successful or not. Your credit history would also show if you defaulted on a loan, but it would not show whether or not you had missed repayments along the way. Both these types of information are now available to lenders.
What can banks see on my credit history?
Your history lists all the credit accounts you have held in the past, including when you opened and closed them and the maximum amount available to you. It also shows default information, where a payment of more than $150 was unpaid for more than 60 days. It shows whether or not you met repayments over the last two years.
It may contain a creditor’s opinion that you tried to get credit dishonestly, plus any court decisions made in regard to your accounts, or bankruptcy, debt agreement and insolvency information.
How does credit scoring work?
A credit score is an automatic assessment of your ability to service a debt. Banks and other financial institutions generate their own credit scores based on your personal situation, your credit history and your credit application.
The number one credit score reference for credit providers comes from Equifax (previously Veda), a company that specialises in credit data analysis. Based on your credit history, Equifax assigns you a score from 0 to 1200. The higher the score, the more likely you will get the loan you are after. Your Equifax score is an indication of how much of a risk you are to creditors. The average score is 550, while 700 is ‘excellent’.
How can I increase my personal credit score?
In a perfect world, we would all have spotless credit histories with no defaults or missed payments, no loan refusals and steady employment and constantly improving incomes! However, none of us are perfect and these imperfections can find their way into our credit history and from there into our Equifax credit score.
Fortunately, there are ways to improve your credit score. The main one is to stop negative debt data from being recorded on your credit history. Where credit card debt becomes an unmanageable problem, our debt solutions may be able to resolve your financial stress before a more harmful situation develops.
It may also help to:
- Maintain steady employment (rather than change jobs frequently)
- Not apply to multiple lenders for loans at the same time
- Stay within your credit card limit
- Always meet credit card/loan repayments
Your credit score is more important than ever. If you can put these points into action, you may be well on the way to getting a better one!
If you need professional help with your debts, we’re here to help. Our debt solutions have helped thousands of Australians get back on their feet. Contact us today to learn more by submitting your details below or calling us on 1300 368 322.