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Know your credit score - the negative effect of bad credit

Tuesday, October 10, 2017

If you haven't applied for a home loan or dealt with Mortgage Broker you probably wouldn't know what your credit score is or more importantly what can cause a negative rating on your credit reports.

Here’s a snapshot of what a report is, and how negative listings can affect your ability to obtain credit.

The image on the left is the front page of a Equifax (previously Veda) report.  You can see that there is a score on the report, running from -200 to 1200, red being bad, and green being good.

The score in the example below shows that this person only has a score of 365, which isn’t good.  A score needs to be around 600 or more for the score to be considered good (subject to bank’s credit criteria and other factors).

You can obtain a copy of your credit report from either Equifax or Dun & Bradstreet.  Both credit reporting agencies offer a free copy as well.  If you need us to go through the report with you to understand it, we are more than happy to do so.  Go to (Veda) or (Dun & Bradstreet) to obtain free copies of your report. 

So as above, we can see that where someone has a bad score, this can have a negative effect on their ability to obtain finance (subject to Lender criteria and other conditions).

Another area on your credit report that can have a negative impact on your credit score is the new accounts and repayments sections in the report that have been included due to the changes in The Credit Reporting Industry, which came into play in 2014.

Due to the changes in The Credit Reporting Industry, our credit reports now contain positive and negative information pertaining to our credit history (basically we moved from a UK based system to a US system).

These changes mean, among other things, that new information is now going to be listed on our credit reports (subject to the lenders reporting said information).

The snapshot below shows how our loans can now be listed on our credit reports, along with whether or not we have paid on time EVERY SINGLE TIME:

We are yet to see the impact on people’s ability to obtain finance as this section is new to our reports, but it will start to have new effects on our credit reports once the system is fully up and running.

For example, if you in the last 12 months had 6 months late repayments on a loan, this could be reflected on your report, and could have a negative effect on your ability to obtain the best interest rates on a new loan application.  Of course, this is all theoretical at this stage, but we will see changes in our reports, and there will be new issues that we will need to tackle moving forward.

We will only start to see the negative impact on the new credit reporting laws in the coming months, as Lenders start recording this monthly repayment information on our reports.

It is also important to remember to go to your trusted finance broker and don’t just apply online for loans. 

This can also have a negative effect on your credit rating.  Having a mortgage broker is a necessity for shopping around for the right loan, whether it’s a home loan or a small personal loan. If you enquire yourself too many times, even if it’s just on the internet or over the phone, you will start getting knocked back for having too many enquiries.

As a mortgage broker we can help you find the right loan for you without completing unnecessary applications or enquiries and with the assistance of Credit Fix Solutions we are here to help you overcome any negative listings on your credit report.

Our first advice is that it's better to be proactive than reactive! So pay your bills on time by setting up Direct Debits, make sure your income is going into your account, and you will prevent any missed repayments having a negative effect on your credit report.

Here at CIGA we are happy to offer free consultations on any credit report enquiries.

If you are aware of an issue on your file we recommend you contact Credit Fix Solutions on  1300 43 65 69 where Victoria Costa and her friendly team are able to help you overcome any negative listings

Karen Fowles