One of the most important steps to purchasing a new house is determining your credit score and reviewing the information in your credit report. Despite this, many Australians don’t understand how to obtain a credit report and how to interpret the information in it. So here is some information to figure out where you stand financially and how it may affect you in getting a home loan.
How credit reporting works
Generally, when you apply for credit, the credit provider may use the information in your credit report to help work out whether you can afford to repay the loan and whether you are likely to repay it. This information generally stays on your file for 5-7 years.
What is in your credit report?
Your credit report contains your name and other identifying information (like date of birth, address, driver’s licence number and current employer) and information about credit applications that you have made. It won’t state whether or not credit was granted for each credit application which has been listed. However, it will include any default listing for unpaid credit amounts which have been notified to you, and then reported to the credit reporting body.
Improving your credit score
You may need to improve your credit score before you apply for a mortgage to boost your chances of being approved while making sure you get the best rate possible. Start by requesting a report from a credit reporting agency. You can use this information to see where you need to make improvements.
Here are some simple steps to start with:
- Focus on paying all of your bills on time. This means everything from credit cards, to phone bills to electricity. It all counts, so the sooner you make the changes, the better
- Understand how your credit score is calculated. Are you negatively impacted by your outstanding debts, do you pay your bills on time or have you recently applied for more credit?
- If you believe there are any errors, contact your financial institution to start an investigation.
- Beware of “credit repair”, “credit fix” or “debt solution” companies advertising a quick fix for your credit rating as these are often expensive and usually offer a service you can do yourself.
Your Zobel broker can help review your credit file refer you to credit reporting agencies and help get your finances on track.
Contact us today!