- What your credit rating is and how it is the same as your credit score.
- Why your credit rating is important.
- How you could be ahead of 73% of Australian’s.
- 5 key steps to fixing your credit rating.
- How fixing a credit rating saw someone $50,000 better off.
What is a credit rating, and is your credit score the same thing?
People often ask me the difference between their credit score and their credit rating. The simple truth is that your credit rating and your credit score mean the same thing.
Your credit rating (also known as a credit score) is a number that indicates your trustworthy reputation for being able to repay your bills on time. Your credit rating is calculated based on the information in your credit report. The higher your rating, the more reliable you’ll appear to lenders.
A negative listing on your credit report will have a negative impact on your credit rating or credit score, and a credit rating or credit score is what a lender uses to decide whether to approve your application for finance.
That’s the brief and quick reasoning of why your credit rating or credit score is vitally important. You may think “so what? I don’t need finance so why does my credit rating matter? Well, that’s true, until the day you decide you need a new phone, a credit card, a personal or car loan or a mortgage.
Why your credit rating is important
From our experience in helping thousands of Australians improve their credit rating or credit score, most people are reactive, not proactive. What I mean by that is that most people leave it until they need finance, and then they try and do something about fixing their credit rating. By then it is often too late. We have seen many people miss out on opportunities of owning their dream homes or driving away in their dream car, simply because they left it until the last minute to address the issues on their credit reports that are causing a lower credit rating or credit score. This has caused numerous families and couples a lot of stress, that really could and should, have been avoided.
Financial stress is a major contributor to relationship breakdowns. You can avoid the stress. As in most thing in life, preparation is key. Making sure ahead of time that you have a credit rating, or credit score that will see you approved for finance is a smart thing to do. That way when an opportunity arises, you are in a great position to take advantage of it. Being ready to answer the door when opportunity comes knocking is invaluable. No one likes missing out.
Let me provide an example. In 2020 the Federal and State Governments across the country released generous Coronavirus economic stimulus package for people looking to build a new home. This was on offer until 31 December 2020. Numerous young families hoped to take advantage of the opportunity, and quite a few came to us stressed because they had issues on their credit reports that were impacting their credit rating or credit scores, preventing them from taking advantage of this one-off opportunity. Missing out meant many families would have to wait for years until they could save enough for a deposit themselves. Because of the 31 December deadline time was critical and unfortunately some people missed out on the opportunity simply because they left it too late to fix their credit rating.
Please do not make the same mistake they made, be sure you are in the best possible position to make the most of an opportunity as and when it arises by checking your credit rating and fixing it now if needed.
How you could be better off than 73% of Australian’s
Many people don’t actually find out they have a problem with their credit rating or credit score until they apply for credit and are declined. In fact, 73% of Australians don’t even know what their credit rating or credit score is. This means that often, by the time most people discover they have a credit problem, they already need finance. Again, this can easily be avoided. If your credit rating or credit score is low, don’t stress, in the remainder of this blog I’m going to give you some tips on what you can do to fix it.
5 key steps to fixing your credit rating
- Request a free copy of your credit report and review it for any issues
In Australia there are three main Credit Reporting Bureaus (CRB, also known as Credit Reporting Agencies). You can obtain a free copy of your credit report from them directly, alternatively we can order one on your behalf.
- Equifax https://www.equifax.com.au/personal/products/equifax-credit-report
- Illion https://www.creditcheck.illion.com.au/
- Experian https://www.experian.com.au/order-credit-report
Once you obtain your report, check it for any errors. Also identify what negative listings have been made.
We recommend you check your credit report before you apply for any form of finance, or account. Do not be fooled by the pre-approval for a credit card, or loan, sent by banks – these will be conditional upon the provider checking your credit report and score. If there is an issue when they check then this will decrease your credit score even more, and you may risk losing out on that dream home you have just spent months looking for or worse still, lose out on a deposit if you have gone non-conditional.
- Correct your personal details
Your current address, employment history and full names have to be accurate so as to prevent incorrect listings and to protect you against having your identity stolen.
If you do notice any mistakes to your personal details simply contact the CRB that has made the mistake on the report, and they will get that rectified if it was an error.
- Get incorrect information removed from your credit report
Any information that has been listed incorrectly on your credit report has to be removed. This involves the creditor agreeing to remove it, and then they instruct the CRB to remove the listing from your report.
With over 10 year’s experience, and a forensic understanding of the 8000 plus pages of legislation, Fix Bad Credit have an expert understanding of the compliance required to make a listing on a credit report. Where there are mistakes, we identify the breaches made, and work with the creditor to have the incorrect adverse listing removed from your report, increasing your credit rating or score.
- Identify and deal with negative listings
Negative listings such as a number of Enquiries, Repayment History Information (RHI) and Defaults can all have a negative impact on your credit rating or credit score.
Every time you apply for a credit account your credit rating or credit score is decreased. Even if the account is approved, your credit rating or credit score will decrease. If lenders such as banks see several enquiries for credit cards, personal loans, and accounts not open, then it sends a signal that a) you may be desperate for money, and b) if you applied for these accounts, and they aren’t shown on your credit report, then you probably got declined, and are risky. As well, having payday lenders listed on enquires is also not favourable. These send a signal that you are unable to live from pay day to pay day. We have seen many people who were declined for a credit card, go and apply with another company. This is a major error. If you get declined, we strongly recommend you get in touch with us, and we will review your credit report, and let you know what your options are at no cost to you.
b. Repayment History Information (RHI)
Banks will report on your ability to pay your credit cards and loans on time. If your payments are more than 14 days past the due date, this will be recorded on your credit report, and lower your credit rating or credit score. This Repayment History Information stays on your credit report for 2 years, and will impact your credit rating, or credit score the entire time. Understand what accounts you have that list Repayment History Information (RHI) and prioritise them for payment.
A credit provider can list a default on your credit report if:
- the payment has been overdue for at least 60 days.
- the overdue payment is equal to or more than $150
A default will stay on your credit report for 5 years. Your credit rating and credit score will be negatively impacted by the default for the entire time it remains on your credit report. We strongly recommend avoiding defaults, if you can, being listed on your credit report.
- Speak with your credit provider
If you are having trouble keeping up with repayments on your loans, you can speak with your credit provider and request a repayment plan the suits you better and prevent default listings being added to your credit report.
If you want to learn more, or if you would like help fixing your credit score or negotiating your debt with your credit provider or lender, talk to one of our credit and debt experts who will happily help you assess your options free of charge.
Or you can check out our FIG centre where we provide jargon free money hacks and tips to assist people on their journey to financial freedom. Here we give access free of charge to a 6 part course on
“How to change your life with your credit report”
We hope these 5 key points help you manage and maintain your credit rating more effectively and efficiently.
How Colin saved over $50,000 by getting his credit rating fixed
In September 2020 Colin and his young family were very excited about purchasing their first home. Colin, a truck driver, had a 5-year plan to save a deposit for a house but realised that the Government incentives, that were available at the time, meant that he could get an extra $50,000 to go towards his deposit – saving him time and money!
It was all very exciting until his finance application was declined due to a bad credit rating from a default listing on his credit report. Sadly, Colin thought the dream was over and he would have to go back to saving for a deposit.
Luckily, the new home consultant he was working with referred Colin to the team at Fix Bad Credit. Time was ticking, but within 8 weeks the Fix Bad Credit team managed to remove the default listing from Colin’s credit report, increasing his credit rating and as a result his lender approved his mortgage application, just in time for him to claim the Government incentives.