A checkpoint summary of how to get a better rate when applying for a loan and improving your credit score in Australia from MoneyPlace head of risk Paul Abbey.
Always pay your credit bill/loans on time
Always. Direct debit is a great option to remove the chore of remembering. As positive credit reporting becomes more commonplace, that repayment behaviour will be shared with other credit providers and as expected, late repayments aren’t going to look good
Check your details with the credit reporting bodies
Regularly check the details held by the Credit Reporting Bodies Veda, D&B and Experian. Consumers are entitled to a free copy of their credit file once a year and it is vital to check the accuracy of the information. The report will list all credit enquiries, current/past addresses, any defaults/bankruptcies and in some cases positive reporting data too
Correct errors on your report
If there are errors on the report, you can contact the credit provider that was responsible, or the Credit Reporting Body. Remember that the contribution of data to the three CRBs isn’t consistent so you will likely find differences in reported information and scores. E.g. A phone company may provide data to D&B, but not Veda or Experian.
A bigger concern is if you’re the victim of fraud or an ID takeover, which is becoming increasingly common.
It is possible to place a ‘file ban’ on your information at the CRBs to protect your data. This means the CRB cannot release information they hold on a consumer to the credit provider for a short period of time – the CRB will also notify the consumer of any attempt to obtain information. Should you ever find yourself the victim of fraud, particularly an ID takeover this is a great tool.
Be accurate in your applications
Always be accurate filling the forms in. If lenders see inconsistencies in the information provided it leads to the question “what else is missing?” It is relatively common for people to “forget” to include their kids on application forms!
Consider your credit needs across all type of loans
With the limitations in the credit reporting system today only applying for credit that is needed – or at least are happy to accept another enquiry on their credit file – remains a key factor. It may not make sense to apply for a credit card with a great points offer if a home loan refinance is coming up soon.
Be realistic with credit limits. If a consumer holds five credit cards with combined limits of $110k don’t be surprised if a prospective new credit provider asks the consumer to close some credit lines down!
More and more credit providers are now tracking who has had point sign-on bonuses in the past. This can sometimes exclude people from new sign-on offers for a period of time.
Get help if you need it
Sometimes, things don’t go to plan – if a consumer finds themselves in financial difficulty, all credit providers have hardship assistance programs to help people through tough times. Reach out and speak to them early if this is the case.
Read the rest of the “How credit works” series:
1. What you need to know when applying for a credit card
2. How loans and credit card applications impact your credit score
3. The upcoming changes in the credit reporting system
4. Key tips for getting a loan in Australia
Disclaimer: This article has been prepared for informational purposes only. The information in this article is general in nature and has not been prepared with your personal circumstances in mind, so please consider if any advice is appropriate to you before making any financial or taxation decisions.
Money Place AFSL Ltd ACN 601 061 438 holds Australian Financial Services Licence 466327 and Australian Credit Licence 466327.