Dirty debt: how to clean your credit card history

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February 16, 2011

Australian credit card holders ended 2010 with record high debts that could smear their credit history for years. Thousands will be scrambling to transfer or pay off this debt in an attempt to avoid sinking deeper into the credit quicksand.

The hard facts
RateCity has compared Reserve Bank of Australia (RBA) data and found that we have reached a record high in our credit card balances, with a total of more than $48.6 billion in November 2010. This has grown 6 percent since November 2009 ($2.57 billion).

The average credit card debt has also risen to almost $3300 - about $100 more per credit card than November 2009, while our combined credit card limits have stretched to a new record of $133.6 billion.
Damian Smith, RateCity's CEO, believes that there are dire consequences for those who don't actively manage their rising debts.

"What many people don't realise," Smith says, "is that higher credit card debts, not paying your bills on time and bigger credit limits can lead to a bad credit file and can last for up to five years."

What's in your file?
Smith warns that even the smallest details of your debt history could be on display to lenders everywhere.

"Whenever you are more than 60 days in arrears for more than $100 and any defaults will show up on your file. Even your credit card limits, enquiries and court judgements could land in your file. That's why it's so important to check the details of your credit file and sort your finances out," Smith says.

Organisations such as Veda Advantage and Dun & Bradstreet can provide you with free access to your credit file, as well as email alert services and express delivery for less than $50.

Tips from the pro
Smith offers his tips on how to dust off your credit history for future credit and loan applications.

  • You can leave comments on your credit file to explain past debts. If there's been a misunderstanding, make sure you fix it ASAP.
  • Stop digging into more debt - that means the end of shopping sprees or expensive buys until you are debt-free.
  • Your unwanted items can be sold to reduce your debts.
  • Compare balance transfer credit cards at financial comparison websites such as RateCity or consolidate your debts into a personal loan.

Don't let debt bury you alive. Grab on to a helping hand by comparing cheaper credit cards and balance transfer solutions to free yourself today.



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