Most Australians have no idea what it is or how to check it, but your credit history determines whether you are approved for a home loan, a mobile phone plan or any kind of loan.
And from today (Wednesday 12 March), changes to the Australian Privacy Laws mean lenders will have access to more information about your financial habits, including 24 months of your repayment patterns for credit cards, loans and other credit.
The changes mean that lenders will now be able to see when you opened or closed a credit account, the current limit on your credit accounts as well as your repayment history. The additional information will be backdated on your credit report to December 2012.
If you haven’t been paying your bills on time or have defaulted on a loan, you may have trouble applying for a new loan or phone plan. The good news is that you can actively improve your credit report by being more careful and ensuring all bills are paid on time.
How the changes can help you
The additional information paints a clearer picture of your credit past. For example, if you previously had trouble with repayments but have since been making repayments on time, the new information will balance out the old behaviour.
“In the past, a late payment on a phone bill or loan could put a ‘black mark’ on a consumer’s record for years to come,” Alex Parsons, CEO of RateCity.com.au, said. “But with the new ‘positive’ changes to credit reporting, consumers will have a chance to redeem themselves and effectively add ‘green ticks’ to their file as they do so.”
To redeem themselves, any consumer with a sketchy credit history will “need to be diligent in making an effort to improve, because the banks will be watching,” Parsons added.
According to the Australian Retail Credit Association, the changes will also benefit consumers with a good credit report by allowing lenders to offer them a level of credit that better matches their capacity to repay the loan and any existing credit they owe.
The changes also provide increased consumer protection. Credit providers are now obliged to help you remove any incorrect information on your credit report, and if your correction request is not resolved you have better access to dispute resolution processes. And there are more options for protection in the event of identity theft or fraud.
Tips for cleaning up your credit history
- Pay bills on time: you can improve your credit record by using credit more often and paying the bills on time, so that the on-time payments outweigh any indiscretions.
- Set up a direct debit with your bank so that your credit card and other bills are paid before the due date.
- Reduce any unnecessarily large credit limits you may have.
- Clear up any disputed records: your credit report includes instances when a lender or credit provider unsuccessfully tried to contact you and reported you as a missing debtor. Visit an online credit reporting agency, such as Veda, to obtain a free copy of your credit report.