Do you know what’s in your credit file?

The state of a credit file is crucial when applying for finance – so why is it that so few Australians know how their credit stacks up?

In today’s digitally driven world, consumer choices are heavily impacted by ratings. They are used to decide the best restaurants, television programs and hotels. Similarly, lenders rely on a rating system, or credit file, to help assess a borrower’s suitability for a loan. Having poor credit can make it more difficult to be approved for finance, yet very few Australian’s actually know their full financial history or how this could impact their future.

Here are the top reasons why every person should check their credit file:

1. If the credit file isn’t great, plan around it.

Having a bad poor credit file will heavily reduce a borrower’s options when applying for finance. In fact, the strict assessment criteria of many traditional lenders will mean they simply won’t consider an applicant with a history of bad credit file.

Viewing your own personal credit file before applying for finance, allows those borrowers who have poor credit to source a more flexible lender from the get-go. This avoids unnecessary “hits” (notations made by each lender with whom a credit application is made) on the credit file which might further deteriorate the credit score.

2. Wait before applying for future finance. 

Knowing the cause of poor credit history might mean it makes sense to delay any application for finance. Credit enquiries, defaults, clear-outs and court judgements remain on a person’s credit file for five years. If a borrower has a default listed on their credit file that is due to drop-off in three months, then it might be worthwhile making the application after the default has been removed.

3. To ensure there are no mistakes on the credit file.

Let’s be honest – sometimes mistakes happen. In fact, the Office of the Australian Information Commissioner reported in 2013 that 30 per cent of credit files have an error on them, from little mistakes such as incorrect name data right through to false records of unpaid defaults. So, it’s a good idea to regularly check a credit file to ensure there are no mistakes.

How can you access your credit file?

Finding out what’s in a credit file is easy, anyone can go online and will be provided with a record of their financial history including applications made with credit providers and any defaults. There is usually a cost associated however some agencies will provide a basic overview for free. Unlike when lenders look into a credit file, if a borrower requests to see this information it does not appear on the file as a “hit” or impact their chances of receiving approval for finance.

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