A credit file is kept for any person who has been credit-active that is, has borrowed money (for a credit card, mortgage, car etc) – over the past seven years.
Your credit file is updated every time you apply for new credit. This credit history impacts on whether or not a credit provider will approve your loan; how much importance is placed on it will depend on the lender.
What is on a credit file?
Your credit file contains information about you and your credit activity over the past seven years, including:
- Personal details such as name, residential addresses, date of birth, drivers licence number and current or previous employer
- Credit applications and enquiries you have made during the past five years
- Records of some current credit accounts
- Overdue accounts (defaults) which have been listed against your name, including an indicator on whether the default amount has been paid or not
- Bankruptcy information
- Default judgements
- Public record information
What is included in public record information?
Public record information includes:
- Judgement and writ/summons information obtained from the various courts around Australia
- Bankruptcy/Part X/Part IX information obtained from the Insolvency and Trustee Service Australia (ITSA) in each state
- Directorship information obtained from the Australian Securities and Investment Commission (ASIC)
How can I get a copy of my credit file?
If you are applying for a home or business loan, it is a good idea to get a copy of your credit file prior to applying for a loan. You apply for your credit profile online at www.mycreditfile.com.au for minimal costs. Obtaining a copy of your credit information file will assist you in understanding, assessing and managing your own credit-worthiness.
Tips for maintaining credit-worthiness
- Pay bills on time. An overdue account is usually a debt that has been owing for a minimum of 60 days. Unpaid accounts will remain on the database for seven years.
- Call your credit provider(s) in a timely manner and alert them if there is a problem meeting your commitments.
- Review your credit file to make sure there are no errors in the information and/or discover any overdue accounts that have been forgotten about.
- Monitor your credit file to ensure someone is not fraudulently using your identity.
- Limit credit applications to necessary situations only. Each new application is recorded on your credit file and too many applications, even for loan pre-approval, can be an issue for some lenders.
- Remember that the details of all overdue accounts, even when paid, remain on your file for seven years from the date of listing.
What do I do if I have past credit issues or a bad credit history?
In Australia, even if you have a negative credit history, you may still be able to secure a competitive home loan. Make sure you are aware of all your options, starting with the following information:
- Inform your mortgage broker and lender at the outset of any problems in your credit history. Your mortgage broker will show you loan products that take your situation into account.
- Explain each problem, why it occurred and how you rectified it.
- Negative responses to credit applications do not necessarily mean your credit file is flawed. Credit providers each have their own lending criteria, so seek an explanation.
- Investigate securing your loan through a non-conforming lender. They consider applications from people with past credit issues. However, you will need to prove you are now in a position to support the loan.