WHY YOUR CREDIT HISTORY MATTERS AND HOW TO IMPROVE IT.

Transcription

1 WHY YOUR CREDIT HISTORY MATTERS AND HOW TO IMPROVE IT.

2 CONTENTS. 1 WHY YOUR CREDIT HISTORY MATTERS 1 2 WHAT S CREDIT? 2 3 WHAT IS A CREDIT REPORT? 3 4 CHECKING YOUR CREDIT REPORT 4 5 IMPROVING YOUR CREDIT HISTORY 5 6 HOW IDENTITY FRAUD CAN HURT YOUR CREDIT HISTORY 7 7 CORRECTING YOUR CREDIT REPORT 8 ABOUT ME BANK: ME Bank is 100 per cent owned by Australia s leading industry super funds. It provides everyday Australians with a genuinely fairer banking alternative. CONTACT US: Matthew Read, Media and Communication Manager ME Bank P (03) E matthew.read@mebank.com.au Level 28, 360 Elizabeth Street Melbourne VIC 3000 Australia, mebank.com.au 2 Why your credit history matters and how to improve it June 2014

3 ONE: WHY YOUR CREDIT HISTORY MATTERS. Accessing credit (borrowing money) is an important tool of modern life. It can help put a roof over your head, rescue you in an emergency, and keep food on the table and bills paid when you have cash-flow problems. But before a credit provider (lender) will lend you money you need to prove your creditworthiness, and that s where your credit history comes in. Your credit history provides a guide as to your reliability as a borrower whether you can be relied on to repay your loan. The better your history, the more likely you are to get a loan. That s why maintaining a good credit history is important: you ll be better able to access affordable credit when you need it. NEW CREDIT REPORTING RULES PROVIDE FAIRER ACCESS TO CREDIT. Getting approved for a loan is a challenge for many Australians. Those who haven t borrowed before and don t have a credit history or who re on a lower income or have a blemish on their credit history, can find it more difficult to get approval for a loan. But recent changes to Australia s credit reporting rules will soon make it easier for many Australians to get access to credit. These changes mean that in the future credit providers will record and share more information about your credit activities, including information about positive behaviours not just blemishes. When this happens it will give a fuller, fairer and more accurate picture of your reliability as a borrower. Because these changes provide a more accurate picture, they also mean that credit providers may be able to see if some people have more credit than they can afford and a poor credit history will be more obvious. TO MAKE THESE CHANGES HAPPEN, BANKS NEED TO DO THEIR BIT. For the changes to work, all credit providers need to get on board and start recording and sharing all the new information they re now allowed collect. ME Bank is a big supporter of the new rules because of the difference it can make to people s lives. We re playing our part and will start recording and sharing comprehensive data about borrowers in the near future. WHAT'S IN THIS BOOKLET. This document has everything you need to know about credit reports including: What is credit? What is a credit report? Checking your credit report Improving your credit history Why identify fraud can affect your credit report Correcting your credit report. ASK YOUR BANK IF THEY RE SHARING COMPREHENSIVE CREDIT DATA WITH OTHER CREDIT PROVIDERS. ASK WHEN THEY LL START REPORTING COMPREHENSIVE CREDIT INFORMATION TO CREDIT REPORTING BUREAUS ASK WHEN THEY LL START USING COMPREHENSIVE CREDIT INFORMATION TO ASSESS LOAN ELIGIBILITY 1 Why your credit history matters and how to improve it June 2014

4 TWO: WHAT S CREDIT? Credit is simply a loan that lets you access goods or services and pay for them later. Organisations that offer credit are called credit providers and charge for the convenience, usually as interest on the credit and other charges. Credit providers include banks and other lenders, as well as companies that offer the option to receive a good or service and pay for it later, like utility companies that let you use their gas or electricity or water and pay for it later. TYPES OF CREDIT THERE ARE MANY TYPES OF CREDIT AND THE COST DEPENDS ON INTEREST RATES AND THE FEES. CAR LOANS TO BUY A CAR. PERSONAL LOANS FOR EXAMPLE, TO PAY FOR A HOLIDAY. HOME LOANS TO BUY A HOUSE. OVERDRAFTS SO YOU CAN TAKE OUT MORE MONEY THAN YOU HAVE IN YOUR BANK ACCOUNT. CREDIT CARDS PROVIDING SMALL AMOUNTS TO HELP YOUR MONTHLY CASH FLOW. STORE CARDS SIMILAR TO CREDIT CARDS FOR PARTICULAR RETAILERS. DEBTS FOR SERVICES YOU DON T PAY FOR UP FRONT SUCH AS ELECTRICITY BILLS. Why your credit history matters and how to improve it June

5 THREE: WHAT IS A CREDIT REPORT? Whenever you apply for credit (a loan), a record of your credit activity is recorded with a credit reporting agency. Other credit providers can then use this information to help them decide whether or not you can repay any other credit you apply for in the future. WHAT S IN YOUR CREDIT REPORT? Your credit report will typically contain information such as your personal details, your credit history, and other information. All of this information is collected, assessed, filed and reported to come up with your own personal credit rating. Your credit report may include: Personal details like name, address, date of birth Credit history like the loans you ve applied for, the date you accessed credit, the type of credit, and credit limit of each open credit account, the date each credit account closed, and 24 months of repayment history including late payments and defaults (defaults are overdue payments of 60 days or more where collection activity has commenced). Other information like bankruptcies, court judgments, debt agreements, personal insolvency agreements HOW IS YOUR CREDIT REPORT STARTED? Credit reports can be created in at least two ways: as a result of an application for consumer credit or commercial credit as a result of information received by credit agencies from third parties such as the courts, who hold judgement information, ITSA, who holds bankruptcy information, and ASIC, who holds directorship information. It s a good idea to obtain a copy of your file at least annually and before you apply for credit, so that you are aware of the information on it. You can then request an amendment if you believe that any of the information is incorrect. See Chapter Four on page 4 and Chapter Seven on page 8. WHO HAS YOUR CREDIT REPORT? Credit reporting bodies, formerly known as credit bureaus or credit reporting agencies, are businesses that collect and handle personal and credit-related data about consumers as permitted by the Privacy Act. The information is sourced from credit providers such as banks and utilities, the Australian Financial Security Authority (AFSA), bankruptcy records, courts and other sources of public records from government agencies. WHO CAN VIEW YOUR CREDIT REPORT? The Privacy Act sets out how the information in your credit report may be used. It also gives you the right to find out what s in your report and get any incorrect information changed. For the most part, only credit providers may access your credit report and only for specified purposes (with your permission). Lenders must also tell you if your credit application is denied because of information in your credit report. Real estate agents, debt collectors, employers and general insurers are all excluded from obtaining access to your file without your express permission. 3 Why your credit history matters and how to improve it June 2014

6 FOUR: CHECKING YOUR CREDIT REPORT. You are entitled to check your credit report for free. If you need to see it quickly, there may be a charge, but if you are prepared to wait a little longer (around 10 days) it won t cost you anything. Here are some possible problems to check for: your name or date of birth might be incorrect your address may need updating a debt might be listed twice or the amount might be wrong you may have missed one repayment on your loan but were never 60 days in default someone might have stolen your identity to get credit Source: HOW TO ORDER A FREE CREDIT REPORT? IT IS ESSENTIAL TO KEEP TRACK OF YOUR CREDIT HISTORY BECAUSE IF YOU HAVE A POOR HISTORY IT COULD AFFECT YOUR ABILITY TO ACCESS CREDIT IN THE FUTURE. VIA DUN & BRADSTREET. 1 Go to the Dun & Bradstreet website: 2 Under the credit report tab, choose the standard credit report. 3 Type in your address and choose a password to register as a NEW USER. 4 Answer the security questions. 5 Complete the personal details on the next screens. You will need a few forms of identity, such as drivers licence, Medicare card and passport. Note, only those marked with an * are mandatory (title, first name, surname, date of birth, gender, address). Note: you may have to supply additional information if Dun & Bradstreet are unable to verify your identity. 6 7 OPTION 1. Select the DELIVERY OPTION for your credit report either online or via mail. Take note of your reference number and you should receive your credit report within 10 days! OPTION 2. VIA VEDA. 1 Go to the Veda website: free-credit-file.dot 2 Click on the Veda Free Credit File Form link. 3 Fill in your details and submit. 4 You will receive an with an application form. Fill in and return to Veda. Why your credit history matters and how to improve it June

7 FIVE: IMPROVING YOUR CREDIT HISTORY. Credit reporting bureaus report on your credit history using information collected in a number of areas. The way to improve your credit history is to make sure that you are not falling wayside in any of these areas. Typically, in order of importance, the credit reporting bureau will assess: YOUR PAYMENT HISTORY. make sure you always make your repayments on time, this shows you are a responsible client that won t need to be reminded to make repayments. THE TOTAL AMOUNT YOU OWE. The lower your debt to credit ratio is, the better think about it a $4,000 balance on a $10,000 limit credit card is much better than a $4,000 balance on a $5,000 limit credit card so try to reduce your debt to credit ratio.. THE LENGTH OF YOUR CREDIT HISTORY. How long you have had credit for it helps if you can show you have been a responsible borrower for a long period of time so obtaining credit early can be an advantage, if used responsibly. CREDIT APPLICATIONS. How often you apply for new lines of credit try to limit how often you apply for new credit as it can look as though you are depending on credit just to get by. TYPE OF EXISTING CREDIT. The weighting of credit products is not identical, for example, being able to manage a mortgage is going to impact your credit rating much more than managing a small credit card, so make sure you repay the weightier lines of credit first! 5 Why your credit history matters and how to improve it June 2014

8 OTHER TIPS Only get credit you need and believe you can repay. Most credit providers will make sure you can pay back the money before they lend it to you, but you should also take responsibility for managing your credit. Be clear about what credit you need and why you need it. Work out a budget so that you know what you can afford to repay. Speak up if you are having money troubles. If you are having trouble repaying your debt, or think you may get into financial difficulties, contact your credit provider as soon as possible as they can often help you for example, by changing your repayment structure. You can also speak to a financial counsellor. Financial counsellors work in community organisations and provide advice about credit and debt issues. Financial counselling is free, independent and confidential. Review your credit report at least once a year or before you apply for credit. This ensures you can quickly spot and fix any errors (either personal or credit-specific), so they don t adversely affect your credit application. Complete credit application forms fully and accurately. If you don t disclose all information about your living and financial situation, credit providers can t make an informed decision about your ability to meet repayments. You might get the credit now, but you could run into financial stress and difficulties when payments fall due. Pay your bills off in small amounts before the due date. Many credit providers offer payment plans where a portion of the bill is debited from your bank account on a certain date. You can also organise to have payments automatically debited from your bank account. If you do this, when you receive your bill you may find you only have a small proportion left to pay or even that you are in credit. Contact your bank or financial institution to find out how to do this. Close down unused credit card accounts. For example, if you transfer your debt to a new credit card provider, ask your old provider to close your account. You will avoid fees and charges, and the temptation to use the additional credit. Review your household bills, bank account and credit card activity statements every month. This will help you spot and investigate incorrect or suspicious transactions, or find bills you may have forgotten about. It also puts you in control of your financial situation. If you have more than one credit card, only ever carry one of them with you. This not only helps control overspending, but reduces the risk of credit card fraud if your wallet is lost or stolen. If you see something you want, but can t pay for it right now, you could save up for the item, use in-store lay-by or ask friends or family to buy it for you as a birthday gift. Use a deposit account to start saving. Set up a deposit account with low or no fees, and transfer money into the account each time you are paid. You could use the money you save to pay for holidays, cover unexpected expenses and make significant purchases. Always remember to update your address details. Each time you change address, you should contact your financial institutions, telephone and utility providers, or any other credit provider you deal with, and provide them your updated details. This will mean that you continue to receive up-to-date account statements and do not risk missing a payment request because it has been sent to your old address. Why your credit history matters and how to improve it June

9 SIX: HOW IDENTITY FRAUD CAN HURT YOUR CREDIT HISTORY. Unfortunately, identity fraud is increasing in Australia, as we continue to electronically store data and develop online technologies. Identity fraud can seriously affect your credit history. A recent survey conducted by Dun & Bradstreet showed that almost one in four survey respondents had either been the victim of identity theft or knew of someone who had a remarkable statistic! In many cases the theft was due to the loss of a credit or debit card or having used such a card over the internet. Stolen information is then used to make purchases and to apply for additional credit cards or loans. But there are ways to protect yourself against identity theft and here are just a few. Read your financial statements thoroughly make sure you are on the look out for any transactions that are suspicious such as charges or withdrawals that you don t recognise Safely dispose of information make sure no one is able to pick up and read what you have thrown away, especially things with your personal information on them such as bank statements - if you have a shredder, use it! Change your passwords often avoid using common passwords such as your date of birth or numbers in sequence (such as 1234 ) and don t write your passwords down anywhere Check your credit report check to see if there have been attempts to open accounts or obtain credit in your name and so that you can correct any mistaken information Don t give your personal details to people you don t know. Don t click on a link or call a phone number in an use a phone directory to look up the correct number Lock your letter box. It is possible for enough of your identity to be put together using information on letters sent from different organisations, so keep your mail secure and safe in a locked letter box. Go to the MoneySmart website for detailed information as well as tips on how to protect your mobile, smart phone and computer. 7 Why your credit history matters and how to improve it June 2014

10 SEVEN: CORRECTING YOUR CREDIT REPORT. If you believe there is incorrect information on your credit report, you can contact the credit reporting body or the credit provider who listed the information, and they will investigate the matter for you. They will let you know the outcome of the investigation and, if needed, fix the information on your credit report. You can ask any credit provider or credit reporting body that you are dealing with to investigate inaccurate information in your report. If your credit information was not addressed on time, or your request was not dealt with in accordance with your rights at law, you can make a complaint (see below). IF YOU ARE CONCERNED ABOUT THE CONDUCT OF YOUR CREDIT PROVIDER OR THE CREDIT REPORTING BODY AND REMAIN DISSATISFIED WITH THEIR RESPONSE, YOU CAN CONTACT: The credit provider that listed the information or the credit reporting body that holds the information. If you remain dissatisfied with the response from the credit provider or credit reporting body contact. An external dispute resolution service, such as the Financial Ombudsman Service or Credit Ombudsman Service Limited (as applicable to your credit provider), the Telecommunications Industry Ombudsman and the Energy and Water Ombudsman in your state or territory; or the Office of the Australian Information Commissioner. Why your credit history matters and how to improve it June

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