What can create a negative listing?
Credit files have a lot of mystery and misinformation associated with them. This is because most people have never seen their own credit file and don’t know what is on it.
Your credit file is a record of the information that creditors think is relevant for assessing you for credit. It is kept by a credit reporting bureau; in Australia this is Equifax (formerly Veda Advantage) and Dunn & Bradstreet.
What information is stored on your credit file?
- Your name
- Residential addresses history: this is updated every time you make an application for credit so it’s not a complete record
- Date of birth
- Driver’s license number
- Employment history: this is updated every time you make an application for credit so it’s not a complete record
- Credit enquiries: last 5 years
- Overdue accounts: last 5 years
- Defaults: if you fall more that 60 days behind with a debt, your creditor can list this on your credit history. These are listed as defaults. Even if you pay the debt back it is still listed as paid defaults.
- Clear out: If you changed address and phone number without telling your creditors, a default may be listed as a clear-out. This is considered a more serious offence, as it is seen that you deliberately avoided paying the debt. These are listed for seven years.
- Bankruptcy Act information: last 7 years
- If you have applied for a debt agreement, personal insolvency agreement or bankruptcy
- Court judgements and writ & summons: last 5 years
- Directorships and proprietorship: currently listed.
This is the first thing creditors look at. If you have a Bankruptcy, Debt Agreement or Personal Insolvency Agreement recorded (discharged or un-discharged) the application will most likely be turned down. After seven years this is no longer recorded on your credit history.
The next thing creditors will look at is any recorded legal action by creditors. If anything is notated in these sections you will most likely be turned down. It doesn’t matter if it is paid or unpaid. After five years this is no longer recorded on your credit history.
If there are any Defaults or Paid Defaults, creditors will most likely turn down your application. Paying a Default does not completely remove it from your credit history.
If you have made a lot of enquiries (e.g. more than one every six months) your application for credit will generally be turned down. Since there is no way of actually identifying which of the these applications for credit were approved, it is impossible for a creditor to accurately assess your financial position. You potentially could have many debts you are hiding. It can also make it look like you are desperate for money.
It is important that you understand that creditors don’t have an endless supply of money to lend. They stay in business through people repaying them. Creditors need to be certain that you are low risk to lend to you. If you have any negative reporting information on your credit history(bankruptcy act; judgements; writs; defaults; or frequent enquiries), you are automatically a higher risk and most likely will be turned down for finance.
If you believe there is a genuine mistake with your credit history, you need to discuss the matter with the creditor who listed you. Equifax (formerly Veda Advantage) cannot remove the information. The creditor needs to notify the credit agency that the notation was listed in error. It will then be removed. If you are unable to have the negative credit item removed from your credit file, then Clean Credit’s credit repair service may be able to help.
If you have a bad credit history and you have outstanding debts, you will most likely not be able to get a debt consolidation loan. This is because lenders could classify you as a high risk.
There are some lenders who do provide finance to people with bad credit. These products often have interest rates that are higher to offset the high risk. There are generally three types of bad credit loans:
- home loans (non-conforming loans, sub-prime mortgages)
- car loans
- payday loans
Non-Conforming loans (Home Loans) generally allow those with bad credit to use the equity in their property to obtain finance however the interest rates. While there may be options for people with bad credit, having a better credit score will nearly always allow you to obtain a better loan option.
Clean Credit’s credit repair service can help you obtain the finance you need now and is also an investment into your financial future. Having a higher credit score will give you more financial options, allowing you to act on financial opportunities and obtain much needed credit.
Take your first steps towards restoring your credit rating and improving your credit score.