In our simple guide to your credit status we’ll tell you...
The details held on your credit report and how they affect you
Recent changes to credit reporting that may help you get finance
What your options are, even if you have bad credit
So you’re thinking of finally rewarding yourself with your dream ride. Or your rust bucket of a car has disintegrated and it’s time for an unscheduled upgrade. Or heck, you’ve decided it’s time you splashed out on that Harley you’ve always had your eye on...
After careful consideration, you decide a car loan (or in the Harley’s case, a motorbike loan) is the most logical way to go. After all, you had to sit through seemingly hundreds of finance ads during the Saturday night movie, so why not take them up on their offers?
There’s just one problem - none of the lenders will give you the time of day. And you can’t figure out why. Your income is solid. You may have missed the odd bill payment here and there, but that was all a long time ago. What’s the problem?
This is where your credit report comes into play.
Banks, lenders, even utility providers and mobile phone companies rely on the information on these reports to help them decide whether to allow you to take on any new loan or debt.
The lender wants to see whether you have any outstanding debts, or have had trouble paying them, before they’ll let you take on any more. It’s the lender’s way of protecting themselves against payment defaults – by only taking on people they think are likely to meet their payments.
So what kind of information is contained in these credit reports? And how important are they to your credit application, and your finances in general?
The simple stuff
First off are the basics: your name, gender, date of birth, driver's licence number, addresses and employer information. Unless you’re rocking multiple identities, there’s nothing to worry about here!
Any skeletons in your closet
Next, we get into your past credit history. This may include applications made in the past five years, overdue accounts, court judgements and court writs, directorship details, proprietorship details, plus any information on bankruptcy, debt agreement and personal insolvency. Even if you've had problems with defaults that you managed to fix up – for example, a car loan you had trouble paying – the record stays on your credit report for four to seven years, depending on the severity of the default or credit infringement.
In addition, your report may contain commercial credit information if applicable, including applications for commercial credit and details of overdue commercial credit accounts.
Read more about how to get a default removed from your credit history and bad credit car loans.
The (possibly) positive
Finally, there’s what’s called “positive credit information”. This is a very recent introduction to credit reporting in Australia and includes monthly repayment history on accounts such as mortgages, car loans, personal loans and credit cards. Under these new credit rules, the lender can now see whether you usually pay your loans on time and whether you paid the minimum amount required. They can then use this information to make a decision on your application.
Depending on your overall financial history, this could be your application’s saving grace or the final nail in its coffin. Under these new credit rules, the lender can now see whether you usually pay your loans on time and whether you paid the minimum amount required. They can then use this information to make a decision on your application. Depending on your overall financial history, this could be your application’s saving grace or the final nail in its coffin.
So how important is all of this to my application?
The answer is, it depends. The sheer volume of financial information contained on your credit report may seem like a good general indication of how important it is. But what’s not always clear is how much weight an individual financial institution will attribute to your credit report when assessing your application. Some have stricter rules than others, so the likelihood of a single minor payment issue being overlooked varies depending on which institution you’re lodging your application with.
Here’s the cruel twist in the tale…any time you apply for credit, including for seemingly small amounts like phone contracts, a note goes on your report. So even if you have a flawless payment history and decide to shop around, too many applications in too short a space of time could raise red flags and may prevent you from obtaining finance. A good way to avoid this problem is to use a finance broker who can match you with the most suitable lender. In most cases, only one credit check is required – plus, someone else does all the hard work for you!
My history’s not great, so I’ve got no hope…right?
Not even slightly. Thankfully, there are specialist financial institutions who may be able to help people with a less than perfect credit history. Depending on your specific circumstances, Rapid Finance could assist you in obtaining finance and finding a suitable deal that is acceptable to you*.
*Every application is different – assessment criteria is based on the applicant's overall profile or circumstances and subject to verification checks and supporting documents. Rapid Finance will do everything it can to assist in finding a suitable loan product based on the applications requirements. Interest rates and fees vary depending on the individual applicant's circumstances and overall profile. Conditions apply.