What’s a credit report? And how can it impact you? Hamilton finance brokers explain

Andrew joined Sinclair Wilson in May 2017 as Mortgage Broker, having spent the past 10 years in the banking industry. With a small business background - in hospitality, no less...

Ever heard of a ‘credit report’?

If you’re over 18 years of age, you will have one (even if you don’t know what it is).

But what does it mean? And how can you find out what your report says?

Your credit report – and subsequent credit rating, dependent on what this report says – will impact any future loan applications you might make, be it for your home, a new car, or even new furniture or electrical items.

So its important to know what your report says, what rating you have, and how you can either maintain it if it’s good, or improve it if it’s not.

Read on to find out more.

What is a credit report and why is it important?

Credit bureaus compile credit reports based on feedback about your credit behaviour, using information supplied by banks and other credit providers, such as utility providers (eg: power or gas companies, or the company you have your mobile phone plan through), and finance companies, like GE Finance.

Your payment history with ‘buy now, pay later’ services, like Afterpay and ZipPay, will also be referenced.

It’s effectively a score card of how you handle your credit responsibilities – whether you pay your bills on time, or if you’re a late payer (or non-payer!) – so that any company considering lending you funds in the future can tell if you’re worth the risk.

Your credit report contains a credit rating between zero and 1200, which is an overall measure of your creditworthiness.

If you’re applying for a loan, credit card, electricity or mobile phone contract, chances are a credit check will be undertaken.

In 2019, under the introduction of the national Credit Comprehensive Reporting rule, it’s compulsory for banks to share both negative and positive details about your credit behaviour with other lenders.

Why you should know what you credit report says, and what your rating is

Knowing this can help you negotiate better deals, or understand why a lender rejected you.

It’s also how you can begin to work towards building a credit report that will make a potential lender happy to lend to you – rather than reject your application.

Knowing what’s on your credit report can also make you more accountable to your credit obligations – now that you know that paying your phone bill late, or missing a rent payment could create a record of less-than-favourable-credit-behaviour, you may be more inclined to make it a priority to stay on track.

As dramatic as this sounds, knowing what your credit report says is also one way to find out if you’re a victim of identity theft! If your credit report lists loans that you didn’t know you had, it could mean that someone else has used your identity to secure past credit.

But I’ve never had a loan. So I won’t have a credit report. Right?

Wrong. Even if, despite being an adult, you have never taken out a loan, never had a phone, never had a utility bill in your name, never had a credit card, you will still have a credit report; it will say that you have no experience with credit. And that’s not appealing to a lender, either.

You might think that avoiding being responsible for these kinds of repayments is a good thing.

But it can backfire on you if and when you suddenly decide you DO want to access credit.

That’s not to say you have to go out and apply for access to credit all over the place.

Just be mindful that having a credit rating serves a purpose; it creates evidence of financial responsibility and accountability; things that are important when you’re asking someone else for access to money, whether that’s now, or in three or four years time.

How to access your credit report

Simply request a copy from a credit reporting body like Equifax, Dun and Bradstreet or Experian.

You can access your report for free once a year and it should arrive within 10 days.

Okay – now I have my report, and it’s good. What next?

Guard that good credit rating carefully! Ways and means to ensure you keep it include:

1. Checking your credit report annually

You are entitled to one free credit report check a year. Use this free access to carefully go through the details on your report. Are there any errors? Is the personal information correct?

If you have any negative information, such as past bankruptcy, make sure it’s removed after the required amount of time.

Are there any old credit cards or finance applications listed there that you no longer use? If you didn’t formally close these finance accounts or cards, chances are they will still be on your credit report. Getting rid of them will improve your rating and make you a better lending prospect.

2. Reporting any errors as soon as you are aware of them
   

Found something that doesn’t seem right?

Do you suspect someone has taken out a loan in your name illegally?

Is it saying a card you had years ago, and never use, is still open?

First, contact the relevant credit provider (eg: the bank, phone company, finance company or utility provider.) Ask them to investigate for you.

You should also file a dispute with the credit reporting agency you’ve accessed – then follow up (regularly) to make sure they are addressing the issue.

This may take time – so be patient, but persistent. It’s well worth the effort!

3. Paying your bills on time

To a credit provider, late payments raise a red flag that you aren’t in control of your finances. And these credit providers won’t take the time to ask questions to get context on why you had six months of late payments, no matter how valid your reasons might be.

If paying on the due date isn’t your strong point, consider setting up autopay or direct debit options to stay on track.

Paying bills on time over a period of time will show lenders you are responsible with money, and can be relied upon to look after any funds you’ve been loaned.

4. Go easy on credit applications

A flurry of credit card applications over a short period of time is another red flag that will make lenders wonder about your reliability. Why do you need all this credit so suddenly? Are you not in control of your money?

Once again, these lenders will never stop to consider or ask context.

Be sure to only apply for credit when it’s absolutely necessary. Only apply for credit from a provider who you are comfortable working with. And only apply when you are confident you will be approved.

I’m the opposite – my credit report’s no where near as good as what I think it needs to be

Get in touch. We can help you with some tips to start getting that rating up to what it needs to be.

Need to know more?

If you’re interested to learn more about your credit report and how it may affect you as a borrower, contact our Finance team We’re here to help and would be happy to answer any questions.