Credit
What is credit?
Credit means borrowing money – either by having a credit card or getting a loan from the bank. You have to pay a high rate of interest to the bank until you pay off your debt.
It is better to save for the things you need than to borrow money, if you can, as you will end up having to pay much more in the long run in the form of interest repayments.
Credit records
It’s really important to have a good credit record. Your credit record is in the form of a report that contains information about you and your credit history, including:
• Your personal details such as your name, date of birth, current and past addresses, employment and driver’s licence number.
• Your credit applications including information on your credit provider, amount of credit and type of credit.
• Overdue payments of 60 days or more when you have been sent a letter notifying you of the default.
• Credit defaults that have been paid.
• Serious credit infringements or ‘clearout’ listings – this is when the credit provider has unsuccessfully tried to contact you in writing and has reported you as a missing debtor.
• Information on the public record such as judgment debts or bankruptcy orders.
You can clean up your credit record.
1. Get a copy of your credit report by contacting any of these agencies:
http://www.mycreditfile.com.au/
2. Check the record is accurate.
3. Fix it. This usually means paying any amount owing on unpaid bills.
Getting a loan
If you want to borrow a large amount of money from a financial institution such as a bank you need to start small. This means that you need to pay your bills on time and meet any debts that you have.
If you don’t pay these small bills you can jeopardise your access to credit in the future. This will mean it is more difficult for you to borrow money for bigger purchases like a car or a house.
Applying for a loan
Having a good credit record is a major factor if you are being considered for a loan, or a credit card. Other factors may include:
• Your employment;
• Your income;
• Your savings;
• Existing liabilities.
If your loan application is rejected ask the credit provider to explain exactly why. Do what you can to fix your credit rating for next time.