Cracking the Credit Code (and other Credit Conundrums)

Credit.

We all use it in some capacity, at some time. Whether it be a store card, buy now pay later, layby, credit card or a loan, most of us are going to be spending money we don’t have at some point. We will have a relationship with a creditor, or multiple creditors. Now, in relationships, one piece of advice that will generally help is that it’s best not to keep score on things like arguments and mistakes In a credit relationship however, creditors and lenders are absolutely keeping score.

They do this via Credit Reporting Agencies. These agencies keep a record of every time you apply for credit in any form, going back two years. In Australia there are 3 main CRAs – Equifax, Illian and Experian. When you apply for a loan, a lender will quite often reach out to these agencies to get your credit history which arrives in the form of your Credit Report.

It’s important to understand that your credit report includes every time you’ve applied for credit, regardless of whether you got the credit or not, in the last 2 years.

For example, let’s say you see an ad for a credit card that has some sort of bonus – a travel voucher, a bunch of frequent flyer points, a gift card – and you think “I could use a holiday” and you apply, that will appear on your credit report, even if you end up not taking up the offer, or they don’t approve your application.

Your credit report can also contain information like any outstanding bills that are over $150 and overdue longer than 60 days. Even though your credit report looks at your last 2 years, defaulting on a bill or loan repayment etc will sit in your report for up to 5 years.

Your credit report will also determine your credit score and credit rating. Depending on the agency, you score will be somewhere between 0 and 1000 or 1200. How high that score it will also go towards your credit rating of either low, fair, good, very good or excellent.

Now, when you get your credit report you may find some errors from the credit reporting agency or even your creditors. Examples of these from the credit reporting agency can be:

• your name, date of birth or address needs updating
• a debt is listed twice
• the amount of a debt is wrong
  
  

Examples from the creditor can be:

• incorrectly listed that a payment of $150 or more was overdue by 60 days or more
• did not notify you about an unpaid debt
• listed a default (an overdue debt) while you were in dispute about it
• didn't show that they had agreed to put a payment plan in place or change the contract terms
• created an account by mistake or as a result of identity theft

To fix these kinds of errors, contact the credit provider and ask them to fix the mistake. If the credit provider agrees it’s wrong, they’ll ask the CRA to remove it from your credit report.

If you can’t reach an agreement you can contact the Australian Financial Complaints Authority.

You might see ads from credit repair companies offering to fix errors. Do your homework. Make sure the company is licensed by checking the ASIC website (not the shoe company). Choose Credit Licensee or Credit Representative in the drop down menu when you search. If they’re not licensed, don’t use them.

Of course there are plenty of ways to improve your credit score.

• lower your credit card limit
• limit how many applications you make for credit
• pay your rent or mortgage on time
• pay your utility bills on time
• pay your credit card on time each month — either pay in full or pay more than the minimum repayment

If you want a really great resource for getting control of your credit, your credit report and your credit score hit up the government Money Smart website.