KNOW THE RULES
Applying for credit
What lenders look for
Each lender uses its own criteria to determine your eligibility for credit. But all lenders gather information about you - and your previous credit experience, from your credit application form plus your ‘credit bureau file’ held with a credit bureau agency such as VEDA Advantage. This file includes credit details such as previous late payments or collection and legal actions (click on ‘What a credit bureau file involves’ in this section to learn more).
As a credit consumer, the main factors to be aware of are the ‘three Cs’ of good credit.
The ‘three Cs’ of good credit:
How responsible you have been with credit in the past.
Your ability to repay the loan based on your income and financial position.
This is security for the lender in case you don’t repay the loan. A house, for example, would be used as collateral for a home loan.
Taking care of your ‘three Cs’ will keep your credit bureau file healthy.
How your credit application is assessed
Lenders look at a range of factors when they consider your credit application. These may include:
Read the fine print
Sometimes you may come across an offer for credit that sounds like a good deal. But always read the fine print. Low introductory interest rates – sometimes called ‘honeymoon rates’, may appear attractive, but they often jump to a much higher rate further down the track. Be aware too, of any fees and charges that may apply.
Your credit bureau file
To find out how well you have managed debt in the past, lenders look at your ‘credit bureau file’ for information about you and your credit history. Your credit bureau file is stored by a credit bureau.
In Australia, the main credit bureau for consumers is VEDA Advantage (formerly known as Baycorp) ( www.mycreditfile.com.au).
A credit bureau file is created when you first apply for credit. Once your file is established, information from subsequent credit providers is used to update your record. With some credit providers it is important that applicants applying for credit have an existing credit history as part of their assessment criteria.
Not everyone has a credit bureau file and not all credit providers submit information to the bureau.
In Australia, we have a ‘negative’ credit recording system, which means only credit enquiries and credit related problems such as missed payments will appear as a listing on the database. This can be for any sort of bill, from your phone bill to your credit card account. Always be aware that missed payments could affect your ability to secure credit with the lender of your choice in the future.
What a credit bureau file involves
Your credit bureau file contains the following:
In some cases, the file will contain a note from you that you would like prospective credit providers to consider. This may be an explanation of a credit default or a name change.
Check your own credit history
It is a good idea to check your credit bureau file at least once a year to make sure the information is accurate. To get a copy of your credit file contact VEDA Advantage on 1300 921 621 or visit www.mycreditfile.com.au. A small fee may apply depending upon the level of information you request as well as the time and method you request for delivery of the information.
What if there’s a mistake?
The first time many people become aware of a mistake on their credit bureau file, is when they are unexpectedly knocked back for a loan. So, it’s worth taking a look at your credit bureau file before you apply for credit.
Check the accuracy of every entry on your record. If you do find a mistake, contact the named enquirer or your credit provider and the credit reporting agency in writing, asking them to amend the file.
If you have difficulties amending your file, you can take your complaint to:
Keep your credit history healthy
Having a good credit bureau file makes it easier to get credit. It also means you have will a wider range of lenders to choose from, potentially giving you access to better terms.
The following steps can help to keep your credit bureau file healthy.