How to perform a credit health check

Significant changes have been made to Australia’s credit reporting rules, with a new Comprehensive Credit Reporting regime (CCR) coming into effect in the new financial year. Which means now is as good a time as ever to perform a credit check.

The new legislation forces full participation from Australia’s Big 4 banks, who have previously refused to take part.

Currently, most lenders share only negative information regarding your credit history. However, the new laws require that positive information such as a history of regular, on-time payments and the early repayment of loans is also included.

It is expected that this will result in increased credit scores for many borrowers.

What is your credit score?

Your credit score is a number between 0 and 1200 that is calculated based on the number of credit inquiries you have made over the last 7 years. It also factors in your repayment history.

If you have made all repayments on time and never defaulted on a loan, your score should be on the higher side.

If you have had missed payments or unpaid (or paid) defaults on your credit history your score may be quite low.

Why should you do your own credit check?

Lenders will have access to your credit score and this directly influences whether they approve a loan for you or not.

As soon as a loan application is submitted a computer generated credit check is performed and your credit score is revealed.

Inaccuracies, errors, or identity theft on your credit history can find their way onto your report and will impact the outcome of your application.

If your credit score is low you may be instantly declined and it is very hard to get the decision overturned by the bank.

It’s therefore prudent to review your credit score once a year to make sure there are no surprises.

How can you conduct a credit check in Australia?

You can get a free credit report once a year from one of three national credit reporting bodies (CRB’s) which are listed on this government website.

You can also get a free report if you have had a loan application refused within the past 90 days, or if the request relates to a correction request.

There are also a number of fee-for-service options, depending on where you live.

Tasmanians are advised to check with the Tasmanian Collection Service and Equifax, and those living in other states, to check with Equifax, Dun & Bradstreet and Experian.

Keep in mind that it’s possible you could have a credit report with more than one agency.

Next steps

If you find errors in your report, you can get them corrected before they can adversely affect your credit score.

For those who find they have a ‘poor’ credit rating, you can take steps to improve it by clocking up a period of future consistency and reliability.

Make sure all loan repayments are made on time and you have no late or missed payments.

If you move house, ensure you update your address and cancel your utilities connections as quite often payment defaults are listed due to simply moving house and the bill not being forwarded on and therefore remaining unpaid.

For those with a good credit rating, you will be better positioned to demonstrate your credit worthiness and seek more competitive interest rates.

If you’d like any help conducting a credit check or addressing what you find out, please don’t hesitate to sing out.

We can walk you through the process to help you secure the credit you need to purchase your next property.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.