Keeping an eye on your credit rating is essential, because if one is not careful it could lead to credit being refused when it is most needed. In today's economy, when plastic money is common and cash hardly ever seen, getting credit is very easy, but paying it back can be a major issue.
Credit File
A credit file is in essence a profile of the credit history on every person using any type of credit. This is whether the credit is coming in the form of a loan from a bank, a credit card, a store card, or something bought on installments. A record of any type of credit regardless of the amount, starting from something as big as the mortgage on a house to something as nominal as acquiring a mobile phone on installments, is maintained on every person. The report details the whole credit history of a person during the previous seven years. Besides for personal information, any overdue amounts and bankruptcy details are noted in the history report.
This file can be accessed by anyone providing credit to determine an individual's creditworthiness. The owner's permission is needed to access the file; if access is denied, the credit provider may not approve the credit requested because it does not have permission to see the file. Files like this help credit providers to determine how much of a credit risk an individual is before approving credit.
Veda Advantage is among the largest providers of credit reporting information in Australia. They maintain files on the credit history of over fourteen million Australians. Veda Advantage does not determine the credit score of an individual, the credit providers have their own system for rating the creditworthiness of individuals depending on the information found in the file. Each individual credit provider will rate each item in the report differently to determine if they are willing to lend the money or not. This means that while one credit provider may refuse to extend credit, another may actually be willing to take the risk and approve it. For example, if there was a default on the individual's part and a payment was not made five years earlier, but has been repaid since, it can be interpreted differently by different credit providers. A default is normally recorded in the credit history if three consecutive loan repayments have been missed and arrangements have not been made with the loan provider to rectify the situation. Currently, the younger generation is getting defaults listed in their credit history files for non-payment of mobile phone accounts. While this may not seem like much at the moment, it can have serious consequences later on, because these defaults remain as a part of the credit record for seven years.
Checking Credit Report
To see what is recorded in the credit report, one has to get a copy of the report. A report can be requested from one of the agencies maintaining such information. Just provide the basic identifying information like full name, address, date of birth, any previous addresses, and driver's license number. Credit reports have to be supplied to the owner free of charge.
Upon receipt of the report check to make sure it is accurate; mistakes in credit reports are not uncommon. It is also possible that forgetting to pay a phone bill four years earlier may be the cause of not being approved. It is also entirely possible that someone has used your identity illegally. In any of these situations, there are steps that can be taken to set the record straight.
If there are amounts that have not been paid, simply contact the lender and settle the outstanding amount. The credit file is updated within five working days of being notified by the lender. If there is erroneous information regarding a bankruptcy, defaults, or other financial information, a File Update Form has to be filled out and proof of the situation provided. An investigation is then carried and if found to be accurate, the file is then updated within thirty days. Of course, the creditors may still refuse to provide credit, but the file will at least be current.
Credit Repair
Suppose one has just been reckless in their youth with their credit line and now requires money to make a down payment for a car, a house, or money to finance their education. Suddenly, there are no credit providers willing to take a risk with their money and lending it to someone with a bad credit history. Additionally, if there are credit providers willing to take the risk, then the interest rate they charge will be significantly higher than what they will charge from a person with a good credit rating.
Given 8% to 10% home loan could mean one ends up paying $110,000.00 more in interest over the life of a loan (based on a $250,000.00 home loan over a twenty five year period). This also means any personal loans or credit card loans will also cost more.
Keeping this in mind, it is important to maintain a good credit history, however, once damaged it is possible to make amends and repair the history. The first step in this procedure is to clear any outstanding amounts. The important thing to remember here is that it is not enough to just pay the amounts owed to repair the history. Once outstanding amounts are cleared, the next step is to set about removing the negative points from the credit history. This takes time, patience, and prevention.
Once all erroneous and outstanding amounts are cleared, the next step is to take measures to prevent it from happening again. This is done by developing good spending habits. Budget the monthly income to pay all bills and any credit card loans first. Get rid of extra, high interest credit cards and stick with one or two that are used most frequently. Consolidate all expensive debts into single cheaper credit facility. Finally, make sure to spend less than what is earned. A general rule should be that if it can't be paid for at the end of the month, just don't buy it.
For more information on getting a credit rating check performed on your credit history in Australia visit www.creditratingaustralia.com.au
Article Source: http://EzineArticles.com/expert/Nita_Fischer/1033212
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