Borrowing money in Australia means there will be a credit rating check. The credit score one gets determines if they qualify for a loan, how much they can get, and at what cost. The method used to calculate the credit rating is a point-based system where the higher the points, the better the chances of getting the loan and at cheaper interest rates. A poor rating can result in loan refusal, or a loan that is smaller than what is needed and a higher rate of interest. All lending agencies in Australia use the services of the official credit reference agencies like Veda Advantage or Dun & Bradstreet for credit information on an individual. Using this credit history, each lender comes up with their own credit score because they all have their own criteria. This gives the borrowing party the chance to get approval with some lenders, even when another lender may have declined them credit.
Credit score and credit history are two different things. In Australia, the credit history is collected by an agency and stored until requested by a lender; there is a second credit history that is being collected by the bank of the credit seeker. The credit history being collected by the agencies stores any defaults, court judgments, and bankruptcies. It does not store any information regarding the payments that have been cleared. In that sense, it is a negative reporting system. After going through the file and looking at their internal credit history for the individual seeking credit, they will generate a score for the individual.
When trying to raise the credit score, the first step is to figure out why the score is low and then set about to rectify the problem. It could be that there are mistakes in the credit history being held with one of the agencies. The way to clear this is to get a copy of the report and see for oneself what the credit agencies are seeing. To do this, just go to the site of the credit reporting agencies and request a copy of the report. Every resident of Australia is entitled to a free copy. If there are mistakes in the report, it is possible to have them removed by providing the appropriate proof
If, however, the problem is not there, then it must be with the bank’s internal credit history. This, too, can be corrected, although it may take a little time. The best way to improve this is to make sure that the checking account is never overdrawn. Learn to stay well within the credit card limits. A general rule should be that if something can’t be paid for at the end of the month, then do not buy it. Remember to pay off as much of the debt on credit cards as possible each month, instead of just paying the minimum amount. This will not only keep one debt free, but save money as well. Pay off any defaults showing up in the file and wait to have them removed. They are eliminated over a period of time.
The next step in improving the credit score is to apply for a $500 credit card line. Since the amount is not that great, most people will not be denied. Use this credit line – making sure to pay it back on time. After that, make certain not to apply for any other loans; this is because the fewer applications made, the fewer the number of inquiries made by lenders. All inquiries made get listed on the report. Try to stay current with the address and job. Also, open a savings account and try to save a little something at the end of each month.
Before making an application with any lender, do a little research and find one that is a bit lenient on credit scoring and apply with that one. When applying, include every asset that is owned. Include such things as checking and saving accounts, car superannuation, and shares. Borrow less than the limit so that the chances of rejection are minimized. Make sure there is a genuine loan purpose as not all loan purposes are accepted. Maintaining a good credit history can make a big difference when borrowing for big things like a house or a car.
