Your credit rating is important if you want to secure business finance, a mortgage or any kind of personal loan to pursue your financial goals. If you don’t have a good credit rating it can make it difficult to get a loan approved by a bank or other financial institution.
Most mainstream lenders have their own credit models, which they plug the data into and an algorithm outputs the answer. If you don’t meet a fixed set of qualification criteria you’re likely to be refused, because they won’t take into account the circumstances surrounding any missed or late payments, or recent efforts to pay off debt.
While you can get a loan with a bad credit rating, you’re likely to pay a much higher rate of interest. So it’s advisable to speak with a finance broker if you have an adverse credit report and let them know the situation. They will be able to advise if there is a suitable lender where the assessment is done on a case-by-case basis (and by a real person).
How Can I Clean Up My Credit Rating?
If you want to find out if there are any actual errors on your credit file you can use a company like Equifax. When you get the credit report, check for errors or ‘adverse notations’. If you discover any adverse notations speak with your finance broker about your options to get finance.
One option may be to seek removal of any adverse history from your credit record. There are a number of specialist credit repair companies that specialise in ‘cleaning up’ credit records. They can find out if an adverse notation has been put on your credit record by a company to which you owe money. Adverse notifications can occur from something as simple as going overseas for a while or moving house and forgetting or missing a phone bill. If the company couldn’t locate you they may lodge an adverse notation. You may not even know this exists until you apply for finance and are knocked back.
If you find out you have an adverse notation on your credit record that is incorrect, a credit repair company can help clean up your file by negotiating with the party that lodged the default to have it removed. This may be long after the notation was lodged. They can also negotiate for you while there is a dispute in progress. Sometimes a dispute has already been resolved in the your favour (so there shouldn’t be an adverse note) but the company just hasn’t removed the adverse notation.
Fees for a credit repair company’s services vary – according to MoneySmart this can be as much as $1,000 to fix one listing – so shop around to get the best deal for your situation.
Comprehensive Credit Reporting
The government approval of a positive (comprehensive) credit reporting regime for the big four banks in Australia will come into effect 1 July 2018. This regime gives more transparency for banks / lending institutions about a borrower’s credit history than before. After 1 July, lender’s reports will include information such as: debt payments, opening and closing of accounts, payment of default notices and any behaviour that supports responsible lending.
Some benefits for borrowers include:
Registering of recent positive behaviour which can balance out a missed payment years ago
Those with short credit history will have more information in their file
One single negative event will not significantly impact an individual’s credit score
It will take repeatedly missed payments or a pattern of bad credit history to make an impact on a credit score
Credit scores or ratings will be more accurate and comprehensive.
Comprehensive credit reporting will have a positive impact for borrowers and lenders as it will create more transparency around someone’s credit worthiness. But if you do need help to contest an error it is good to know there are companies out there that can help you clean up your credit file, if needed. Talk to your broker to today if this is the case.