Having a good credit record is important if you want to borrow money in the future, so take a few steps to ensure that yours is as squeaky clean as possible.
Step 1 – Do a credit check on yourself
A credit check is something that financial institutions often do on us when we apply for a loan, but it’s not something that we often think of doing ourselves.
Your credit file holds personal information about you as well as details of loans that you have, any credit applications that you have made and details of past and present overdue accounts. You could be surprised at the amount of detail! Information is held on your account for between four to seven years.
A bad credit file can cost you a lot in the long term. If you haven’t paid your bills, or if you’ve had your power cut off, your car repossessed or skipped payments, exceeded card limits or defaulted, you could be refused a loan or be charged a higher interest rate.
It’s a great idea to check your credit report occasionally, not just to tally up the black marks but also to ensure that there are no errors – and to make sure that you haven’t been an unwitting victim of identity fraud!
It’s easy – you can obtain a copy of your credit file for free within 10 working days by contacting Veda Advantage at www.mycreditfile.com.au or or Dun and Bradstreet at www.dnbcreditreport.com.au.
Step 2 – Clear up any disputed credit records
Your credit report will contain records of overdue payments of 60 days or more when you have been sent a letter notifying you of the default. Also ‘clear out’ listings – when the credit provider has unsuccessfully tried to contact you in writing and has reported you as a missing debtor.
When you receive our report, go through the listed information carefully. If you believe that a bank or phone company has unfairly listed an overdue account on your credit file, you should contact them and ask for an explanation and for the incorrect information to be immediately rectified.
As with other banking complaints, if the issue is not rectified in a reasonable amount of time then you can refer the matter to the Financial Ombudsman Service (FOS) by filling out an online disputes form available at www.fos.org.au, or telephoning 1300 780808 for further assistance.
If it is a non-banking matter and you complaint is not rectified in a reasonable timeframe then you can contact then you can refer the matter to the relevant industry ombudsman (for example, the Telecommunications Industry Ombudsman, or the Energy and Water Ombudsman).
Step 3 – Improve your credit
To change a bad credit record into a good one, use credit as much as you can, meeting all repayments on time, so the good record outweighs the bad.
You do not have to spend more, just put all your spending (bills, groceries, petrol, transport pre-pay tickets) on a credit card and pay it off every month.
You can arrange with your bank to have your card paid automatically from your savings or transaction account.
Step 4 – Get help from family and friends
Get someone else to check you are paying your instalments and bills each month – a parent, friend or partner. Think of other ways to get organized, so you can borrow your way out of trouble.
Step 5 – Seek counseling
If you are unsure whether you will be able improve your credit rating by yourself then seek some professional help. Financial counseling is a free and independent service offered by community organizations.
The Australian Financial Counseling and Credit Reform Association (AFCCRA) is the peak body. You can access their website and a list of free services in your area as www.afccra.org.