By Allison Tait, ninemsn Money
How old were you when you got your first credit card? Store card? Heck, mobile phone? Chances are you were young and that you’ve been merrily adding to your collection of credit accessories ever since. Have you ever considered that it could all come to a screaming halt one day? That you might be, gasp, refused credit. Well, if you don’t keep a close eye on your credit file, your days of flying high on someone else’s dollar could be over.
What’s a credit file?
It’s basically a dossier on every person or business who’s been ‘credit-active’ during the past seven years. It records details of the type, purpose of, and amount of credit you’ve applied for during that time, as well as outlining overdue accounts, bankruptcy details and other personal information. Your file can be accessed by credit providers when you make an application for credit, or providers of goods and services when the payment is deferred by a minimum of seven days. No-one can access your file unless you give them permission. Baycorp Advantage is Australia’s leading provider of credit reporting information. “We are custodians of the credit history files of over 14 million Australians,” says Erica Hughes, general manager Information Services and Solutions.
Okay, why do I care about this?
The information in your file impacts on your ‘credit-worthiness’ – so banks, retailers and credit providers check it before they decide whether to lend you money or give you credit.
But surely a credit rating is only ruined if you miss a big payment or something?
Baycorp Advantage doesn’t actually apply a credit rating or score to your file. Credit providers each have their own system for rating you, depending on the information in your file. They’ll give different scores to each item in your file, so one credit provider might decline your application where another will approve it. So you need to stay on top of each and every section of your file. An overdue account or default, for instance, is shown on your file for five years (even if you’ve since repaid it) – and might mean the difference between getting a loan and missing out!
“A default is generally lodged on a persons credit history file when they have not made three consecutive loan repayments and have not entered into an arrangement with the lender to make these repayments,” says Erica. “About 14 per cent of individual credit files have a default listed. Increasingly younger people are having defaults listed on their files through non-payment of mobile phone accounts.”
Uh-oh, I may have a problem what can I do if I get knocked back?
The first thing is to obtain a copy of your credit file, to help you understand why you’ve been declined. You might find that the phone bill your flatmate forgot to pay in 2003 is blighting your credit record. Or you might find that the information in the file is incorrect, or that someone has been using your name to obtain credit illegally (in both cases, Baycorp Advantage has advice on the steps you need to take to redress the situation). Of course, you may have paid that phone bill in 2005, but the credit provider in question is still not happy to take the risk each provider has its own lending criteria.
Is there any way to fix a blotted credit file?
If you have overdue accounts you can contact the lender in question and pay them. Your credit file will be updated within five days of the lender notifying Baycorp Advantage that the account has been paid. If you feel that there is erroneous information in the file regarding bankruptcy, defaults or other financial information, you need to fill in a File Update Form (provided with a copy of your credit file) and return it with proof of your situation. The information you give will be investigated and, if you are proven to be correct, the file will be updated within 30 days. Despite all this, however, lenders may still refuse you credit if your application does not meet their lending criteria.
Should I be keeping an eye on my credit file?
Yes, yes and yes. It’s all about you and your reputation don’t you think you need that information? If only to help guard against credit fraud. If you check your file annually you’ll notice any irregularities much faster. It’s free to obtain a copy of your file if you don’t mind waiting a couple of weeks, or it costs $27 if you want Baycorp to turn it around for you in one day. All details at www.mycreditfile.com.au
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