Know Your Credit Report

"Know Your Credit Report"

Ever wondered how your credit report affects your loan applications?

If you’re applying for finance, it’s important to understand the ins and outs of your credit report. As well as what you can do to get the best outcome for any application. Lenders look at many things in your credit report and what they see will affect the outcome of your application and applications into the future. So, get familiar with what a credit report is and the different credit reporting agencies. Ask yourself where you can get your credit report from and what you can do to help your score.

So, what is a credit report?

A credit report is an individual’s creditor history compiled into one report. Your credit report generates your credit score and is formatted in a way so that lenders and creditors can easily assess the likelihood you will pay them back. If you have ever applied for personal finance, a credit card, home loan, mobile phone or even a gas or electricity contract, chances are, you will have a credit report with one of Australia’s credit reporting agencies.

What is a credit reporting agency?

A credit reporting agency is a company that collects and maintains an individual’s credit information. Lenders and creditors use this information to analyse an individual’s credit history. Credit reporting agencies try to aim to ensure they have enough information to help the lenders make educated decisions. For credit reports Australia, the main credit reporting agencies that generate reports include Dun and Bradstreet and Veda Advantage.

What happens when you apply with a lender and they do a credit check?

When you apply for personal finance with a lender, numerous information and consent forms are gathered in the application stage. The lender will gather your full name, date of birth, gender, drivers license, residential address and possibly employer information. This will ensure they have enough detail so they can accurately check your credit report. When applying for credit, it can’t be stressed enough how important putting in the right personal details is.

It’s not uncommon for people to have more than one credit report at once because they accidentally filled in their details incorrectly. Linking these up can be a hassle so triple check the information and make sure it’s right the first time. It’s also important to note that a lender will always ask for consent or permission during the application. Without consent, they can’t access your credit file. So, if you’re completing an application, be willing to have an extra enquiry on your report.
Read our disclosure acknowledgements and consent here

If a creditor is interested in lending to you they will generally check your credit report. Doing this will leave an enquiry on your file from that lender. The enquiry left on the report will show how much you applied for, the type of credit you applied for and the date of the enquiry (usually the day you applied). Any credit enquiries will stay on your report for five years and can be seen by any other lender in that time.

What does the lender look at?

When a lender gets a credit report from their chosen credit reporting agency, generally a Veda credit report or a Dun and Bradstreet credit report, there are a number of things they look for to help get an outcome. On the credit report, the first two things that jump out at the assessor are the credit score and credit report age. These are the two more important aspects of your report. Your score is an indication of how likely you are to pay back the credit that could be lent to you. In the eyes of the assessor, the better the score, the more likely you are to pay the loan back. The age of your file is also important as it gives the lender more faith in you. The older your credit report is without anything adverse, the better it looks to the lender.

The lender will also look at other areas of your credit report, such as previous addresses, defaults, enquiries, bankruptcy, court actions and even business relationships. All these aspects affect your credit score and give the assessor a better insight into your financial history. The type of credit or product you are applying for will impact how the lender will look at these areas in your report. It will also determine how they take them into account when assessing your application.

What to avoid?

If you’re serious about bettering your credit score, it’s important to know what to avoid doing. A key point to understand about your credit score is that more is not always better. Things like enquiries and amount you apply for affect your credit score. If you know exactly how much you need, don’t apply for more than that. Applying for a higher amount than what you need can affect your credit score in a negative way.

If an unexpected expense does pop up and you do need emergency cash loans or an unexpected bills loan, avoid applying with multiple lenders at once. Multiple enquiries on your credit report over a short period of time can greatly affect your credit score and indicate to the lender you are desperate for funds. Even if the expense is urgent, applications these days are generally accepted or rejected within an hour.

For the sake of your credit score, it may help to apply with one lender and then wait to hear back before applying elsewhere. If your credit report for the last 3 months shows that you applied to three different places in one day, you might want to rethink your borrowing habits. This sort of shopping around can hurt your score. So, make sure you stop and consider if more really is better.

Additionally, avoiding any default listings on your credit report will help your chances with lenders. If you default to a lender, telco company or even electricity companies, they can put a default listing on your credit report. Most of these institutions will have hardship teams that work with clients to find manageable solutions to pay back what was borrowed before listing it on your credit report. Make sure you talk to lenders and try to find a solution to avoid any default listing or find out more about credit defaults.

If you don’t pay back the lender, how does a credit default work?

If you do avoid lenders, it’s important to understand what they can do and how this affects applications into the future. For example, if a debt is 60 days overdue, the company can report it to a credit reporting agency to be listed as a default. Before listing the default, the credit providers must take a number of steps. These steps will include requesting payment from you on two separate written occasions to your last known address. Then, they will advise you that the debt may be listed with a credit reporting body. If you fail to respond or work out a solution, a default will be listed on your credit report. This listing will stay there for five years and any future creditors can see the listing in that time. So, it’s important to make an effort to work with the creditor before you’re stuck with a default for five years.

How do you get a free credit report?

As a consumer, you are entitled to check your credit report for free once a year. To check it quickly, there may be a charge. However, if you’re willing to wait around 10 days, you can receive your free credit score check online. To get your credit report in Australia, you can contact any of the main credit report agencies in Australia. You’ll just need to provide your full name, address, date of birth, previous address and driver’s license number. As we mentioned, the 2 main credit reporting agencies for Australia are Dun and Bradstreet and Veda Advantage.

Why should you check your credit report?

It’s a good idea to find out what’s in your credit report. There is no harm in knowing and it will allow you to make changes to your borrow habits if necessary. Checking your credit report can also alert you if there are any incorrect listings. It’s not uncommon to find incorrect listings and, in worst case scenarios, you could be a victim of identity theft. In general, here are some simple things to look for that, if wrong, can affect your credit score:

  • Your address may need updating.
  • Your name or date of birth may be incorrect
  • A debt may be listed twice
  • A debt listing amount may be wrong

In general, just checking your credit report can give you an indication if you have bad credit and what sort of finance you may be eligible for. If you do find anything incorrect on your credit report it’s important to dispute it. So, how do you dispute an error? It’s both the credit reporting agency (Find out more about positive credit reporting) and information provider’s responsibility to correct any inaccurate information. However, you must inform them of the error. So, state the facts and gather any documentation that supports your position and email or mail both of these providers with your case.

What happens if you have a bad credit rating?

If you’ve checked your credit score and it’s given you a bit of a shock or maybe just isn’t as good as you’d hoped, where does this leave you? Firstly, it’s important to understand that different lenders have a different perspective of what ‘good’ and ‘bad’ credit is. So, what you may consider as a bad credit rating may be different to what a lender considers bad credit. You may not be eligible for the big banks or traditional lenders but there are other options out there. There is no need to freak out. There are many lenders that specialize in working with people who have bad credit to find a solution to your financial needs.

Can I get a loan with bad credit? How can I borrow money if I have bad credit?

It’s important to understand that your credit rating is only one aspect of your assessment. There are other ways that you can prove to the lender you will pay back the loan. Lenders look for many other consistencies across the documents you provide during the application. Therefore, it’s very possible to get a bad credit loan. One way to improve your chances is to be able to show a consistent income whether it be through employment or Centrelink benefits. Other things, like regular direct debits and leaving some money in your account, can also help your chances of being approved. However, one thing to look out for is any lender that claims to offer no credit check loans. This is an example of irresponsible lending and it could very well be a scam. Don’t trust any credit provider that claims not to do a credit check.

Can you get a car loan with bad credit?

The short answer to this is yes. A car loan is a different product to an unsecured loan. Therefore, lenders look at them with a whole new set of eyes. Offering up your car, motorbike or even your boat as security reduces the uncertainty and risk to the lender. If the loan does fall down, the lender has that security to fall back on. They also have the right to sell the vehicle to get their money back in the case that you default on your loan. So, if you are having trouble getting finance, maybe consider offering your car up as security. If you’re someone who uses Motor Finance Wizard, here are some tips to get you out of trouble.

Consider the value of your car and if anybody else has security on it. Don’t be frightened away by thinking the repayments on a larger secured personal loan will be bigger than smaller unsecured personal loans. They are usually stretched over a longer period to reduce the repayments and make them more manageable. If you are willing to attach your car for security, you may have a higher chance of being approved for debt consolidation loans for bad credit.

Which loan company is best for bad credit?

Here, at Jacaranda Finance, we pride ourselves on our transparency and personalised customer experience, and assist people who need a bad credit loan. We understand that not all people have good credit and that there may be something adversity on your credit report. That’s why we consider more than just your credit score on your application. We work with clients and review their bank statements to look for alternative proof that clients are trustworthy. We’re open with clients as to why they may be limited or rejected. But of course, we want to help everyone and will always work with you to understand your financial situation.

Don’t want your kids to end up with bad credit? Try our tips for teaching kids about money.

Here are Jacaranda’s simple steps for financial freedom!

Like what you're reading?

Read more like it

Jacaranda Finance rated as one of the best personal loan services in Australian consumer opinion awards

Read more >

Blog Post Thumbnail

6 Financial Goals To Set For 2019

Read more >

Blog Post Thumbnail

Good With Your Money? A Minimalist Approach To Personal Finance

Read more >

Blog Post Thumbnail

Saving Money On Family Vacations. Keep Within Your Budget!

Read more >

Blog Post Thumbnail

Simple Steps To Financial Freedom!

Read more >

Blog Post Thumbnail