What Affects Your Credit File?

Apr 19, 2017

Checking your credit score and report should be considered a ‘must do’ prior to applying for any type of credit. From large credit applications such as a mortgage or a MacCredit loan, down to mobile phone contracts and utility bill accounts, your credit file will be checked to assess whether you can be relied upon to make timely payments.

When you check your credit file, you will:

  • Be able to understand how likely you are to be accepted for credit by a particular lender
  • Be able to identify any inaccuracies and take steps to correct these
  • Be able to identify factors that are holding back your credit score
  • Be able to plan what you need to do now and in the coming months to improve your credit score

By doing this, you will put yourself in a great position for ensuring you are approved for credit in the future, whenever you need it and whatever the reason for needing it.

Australia’s credit bureaus like Equifax and Dun & Bradstreet are options you have for checking your credit file.


What Effects Your Credit File and How Can I Improve My Credit Score?

Numerous factors affect your credit file.  Here is a rundown of both the widely known and lesser known factors, and some tips for ensuring your credit file always paints a positive picture of you from a credit perspective.

Making Late Payments

The most basic obligation you have when opening any credit account is to make your repayments on time. Although creditors can only place a notice of late payment on your credit file if a payment is 14 or more days late, do not allow this to lull you into taking a carefree approach to making repayments.

Defaults and Other Infringements

If you do make late payments and these are logged on your credit file, if you do not take action to get your account up to date you may default on your agreement. If you then still fail to repay the money you owe, further financial sanctions could follow. Depending on the extent to which the situation escalates, you may find yourself subject to a court judgment or even bankruptcy proceedings.

All of these outcomes, if they occur, will be logged on your credit file and make it very difficult for you to acquire credit in the future.

How do you avoid this?

By making all your payments on time, and by being upfront and honest with your creditors if you ever reach a point where you are starting to struggle to meet your debt repayment obligations.

Information and sanctions around late and missing payments are factors that most people know can influence their credit file.  

What are the factors that are lesser known but that could be helping you unintentionally damage your credit score?

How Many Credit Enquiries Have You Made?

Your credit file contains information on all the credit enquiries you have made in the last five years. If you have made a significant number of enquiries within a short space of time – for example more than three in the last six months – this can reduce your credit score.

Repeated credit enquiries are interpreted as a desperation for credit, and may be a sign that you are a credit risk. Although it is tempting to apply for credit with a different lender if you are declined – different lenders have different criteria, after all, so you might have a better chance of being accepted elsewhere – you should check your credit file, ensure it is correct, and only apply again once you’re more sure of being accepted.

Payday Loans

Payday loans can cause havoc with your credit file. Despite what payday loan providers say about building your credit history by using them, any benefit of repaying a payday loan on time is massively outweighed by the damage done by using them. A payday loan is a sure sign of short term financial need and potentially an inability to manage your finances. While you might be able to apply for further payday loans without any problems, when it comes to acquiring other types of credit you may struggle to be accepted.

Banks and finance providers that offer mortgages and other types of credit may even refuse an application on the grounds of you having used payday loans within a specific recent period. If you are having short term financial difficulties, look at other solutions before turning to payday loans, as they could have a dramatic effect on your ability to acquire credit in the longer term.

Managing Your Credit File

Make it a regular and on-going financial habit to check your credit file and ensure all the information held is up to date and correct. Be aware of these factors and how they can affect your ability to acquire credit, and you’ll find you are usually able to access credit whenever you need to in the future.

Disclaimer:  This article contains general comments and recommendations only.  This article has been prepared without taking account of your objectives, financial situation or needs.  Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.

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