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Protecting your credit rating

From Money Magazine, April 2003 Applying for a loan can be a nerve-racking experience. Your credit history will play a big part in a lender’s decision to lend you money or not. Maria Bekiaris checks out how your credit rating can affect a loan application and what to do if there is a problem.

A lender is able to access all the information on your credit history by obtaining a copy of your credit file which contains:

• Personal details such as your name, residential addresses for the past five years, date of birth, driver’s license number and current or previous employer.
  
  
• Credit applications and inquiries you have made during the past five years.
  
  
• Records of some current credit accounts.
  
  
• Overdue accounts (defaults) listed against your name.
  
  
• Bankruptcy information.
  
  
• Default judgments.
  
  
• Public record information such as directorships and proprietorships.

Standard defaults are listed on a credit report for five years. After five years the listing drops off,” explains Emma Asscher, adviser for Credit Helpline. A bankruptcy stays on your file for seven years.

Defaults or a bankruptcy aren’t the only things on your credit report that might influence a lender’s decision. Bond says the number of addresses shown on your credit report for the past five years can make a difference, as can the suburb you live in. Even the number of loan applications you have made could influence the decision. “If there are too many applications in a short period of time, this can go against a person in obtaining a loan,” says Asscher. The type of company you have applied to might also affect your application.

So what should you do if you suspect your record is tarnished? “Before you apply for credit you should get a copy of your credit report,” says Bond. You might think something may have made it on to your file because you received a letter saying a repayment was overdue, or you paid your phone bill late one month, but that might not be the case.

For the complete story see Money Magazine's April 2003 issue. Subscribe now.