Is your credit report healthy?

One of the things lenders take into consideration when assessing your ability to repay a home loan is your credit report.
As part of the loan application process, they’ll assess your financial history, including any previous credit applications you’ve made and any payments you may have defaulted on.

If you’re in the market to buy a property, here’s why you need to check your credit report.

What is a credit report?

A credit report is a detailed record of your credit history. It includes information about the types of credit you have applied for, which loans you’ve opened and how you’ve repaid your debts.

Credit providers like banks and utility companies provide details about your credit habits to credit reporting bodies, which then compile your credit report.

Your credit report may also include a credit rating. This is a numerical value that represents your creditworthiness and how reliable you are as a borrower. The higher the score, the better.

How to check your credit report.

In some instances, a credit report can contain a false or incorrect entry. That’s why it’s so important to check yours regularly (you can do so every three months).

If you’d like to access your credit report, please get in touch.

If you do notice something is amiss, you can find tips for fixing your credit report on the moneysmart website.

What is your credit report used for?

When you apply for a loan, the lender will use your credit report to help them decide whether to lend you money, how much they will lend and on what terms.

Of course, they’ll also consider things like your assets, liabilities and living expenses, but your credit report is a consideration.

Does your credit report contain positive information?

Yes. Credit reporting changes have come into effect requiring banks to pass on positive information about your credit history as well as the bad stuff.

Instead of just sharing negatives like defaults and infringements, now your credit report includes positive financial behaviour such as whether you have a solid repayment history.

This gives lenders a clearer picture of your credit history when deciding on loan applications.

Financial hardship changes

From July 1, 2022, changes will come into effect relating to the reporting of financial hardship information.

Say something unexpected happens. A natural disaster for example, and you have to enter into a ‘financial hardship arrangement’ with your lender.

Previously, your credit report might have shown you missed repayments during the arrangement without it being evident that you and your lender had agreed to a financial hardship arrangement.

Now, the repayment history information on your credit report will reflect that there was a financial hardship arrangement in place.

Essentially, it means that if you’ve needed financial hardship assistance, you can better demonstrate your creditworthiness through more accurate reporting of your circumstances.

To find out more about these and other changes relating to financial hardship and credit reporting, head to the CreditSmart website.

How to keep your credit report healthy

Here are some tips to keep your credit report in check:

• pay your bills and loan repayments on time
• pay your credit card off in full each month
• lower your credit card limits and cancel credit cards you don’t need
• consider consolidating debt (speak to us about whether this is right for you)
• limit your credit enquiries
• remove your name from utility bills if you move
• be cautious about identity theft
• regularly review your credit report.

Like to know more?

If you’d like to access your credit report, please get in touch.

I can answer any questions you might have on how to improve your credit report (and therefore your desirability as a borrower to a lender). We’re here to help.