So….we have a deposit and our funds to complete. It looks pretty positive now that we have the income that can meet the repayments. We have sorted out our credit cards and store cards but there’s one more thing that can damage our chances of a successful loan approval and that’s our Credit Report.
Most people are not even aware that they have a credit report or that they are allowed to access it. It is highly recommended that you actually obtain a copy of this report prior to applying for your loan. It would give you enormous confidence when speaking to your lender, knowing you have the credit report in your bag and that it is perfectly clear.
Clear you ask? What does that mean? Well….your credit report contains information about your credit history. This information is collected from credit providers, courts and other organisations by credit reporting agencies.
The type of information that is contained in your credit report will be, your personal details and any joint applicants details if you have applied for credit with another person. Information about the credit cards and store cards that you hold; Arrears that have been brought up to date, debts that were unpaid and overdue that have now been paid or settled; Defaults and any other credit infringements – these could be utility bills or loan payments that are 60 days overdue and where any debt collected has started; Credit applications – any time you have applied for any type of credit and where you have been the guarantor; Debt agreements – any bankruptcies, court judgements, debt agreements or personal insolvency agreements in your name; Repayment history – information about your repayment history on credit accounts. This is a new agreement that as only just been made allowable by the government but is only allowed to be reported on credit cards, not utility bills or phone bills etc.
Also listed on your report, are the credit providers that have requested a copy of this report. No one is allowed a copy of your report without written permission. This is usually in the form of the privacy act form, that you are requested to sign at the time you make your application for credit. This gives the credit provider permission then to order a copy, which assists in assessing your suitability for credit.
A credit provider or debt collector who makes an application to have this listed normally lists defaults on your report. A credit provider may report your debt if – the default is more than $150, you have been confirmed as a missing debtor which means that they provider cannot get in touch with you by phone or other methods, 60 days or more have passed since the due date for the payment and the credit provider has asked you to pay the debt either in person or other means. These defaults will be listed on your report for 5 years. If you repay the debt, the listing will still remain, however your report will reflect that you have paid the debt.
When you apply for your loan, if it is declined due to something on your credit report, the lender must tell you, however cannot go into detail about what exactly the problem is. This is when you can apply for a free copy of your report prior once per year via the website www.veda.com.au . You will need to provide the agency with your personal details and proof of ID and proof of address eg: a Utility bill. If you wish a more urgent copy, a small fee will enable you to receive the report direct to your inbox within 24hrs.
Sometimes the report may show errors that need to be amended. This can be due to late processing by a credit provider, which leads to the default being listed, however you had paid the bill prior to the cut off period. There can also be an error placed on your report from a third party who has committed identity fraud, other occasions can be from mistaken identity if you have a fairly common name and the credit providers have listed items on your report that belong to someone with the same name. This can be a very common occurrence and this is why it is vital to take advantage of the Veda alert system, that notifies you of any listing that have been placed on your report, so you can immediately pick up on anything that clearly does not belong to you.
Most Lenders will have their own policy on what they will allow to show on a credit report, before accepting or declining a loan. In most cases, if the default has been paid, they will allow pre-approval or full approval of your loan.
Something extremely important to remember with credit reports is that Applications will show up on your report. Anytime you go online and apply for a credit card just “to see” whether you will get approved, this application will be on your credit report. Unfortunately, if a Lender sees multiple applications on your report, if reduces their confidence in providing you with credit. They see this as a means to question “why” you would need to keep applying for credit and this can automatically decline your application. This would prevent you from applying from any loans for a minimum period of 3 months and could cause you to once again miss out on your dream home.
My recommendation is that you apply for your free online copy of your credit report and make sure that it is “clear” of any of the items I have listed above and feel free to show your Lender at your first appointment so both of you have the confidence that this item is not going to hold you back from reaching your dream – after all – you’ve worked too hard through our previous steps to be held back now!!
Credit Advisor
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