As young people, we should be extra vigilant with our credit file.
The system of credit we live under is eager to suck people in but shows no remorse when we fall off track. We have got to be wise and ensure we are making credit work for us, not letting it beat us. Our credit file lists personal details like our name and address, but also any times we have applied for credit, any defaults (overdue accounts), court Judgments, writs and bankruptcies we have accrued.
Many of us don't realise how easy it can be to end up with a bad credit rating.
Here are some of the typical situations where we can find ourselves with a black mark against our name:
Unpaid accounts: Any credit accounts or loans - including mobile phones and electricity that run over the due date are considered unpaid accounts. If they are not paid by the due date, creditors will make a note of it. If the account is not settled within 60 days from the due date, creditors can list this unpaid account or loan on our credit file as a default.
Moving/traveling: If we move around a lot, the danger can be ending up with defaults on our credit rating due to unpaid accounts we were not aware of. Typically an account gets sent to our previous address and remains unpaid and then listed as such on our credit file. We should consider a P.O. Box for all our mail or alternatively a parent's address.
Share accommodation: Any accounts which have our name on them, regardless of who intends to pay them are our responsibility - this includes rent. Some of us get caught out in share accommodation. Someone leaves a bill unpaid, and because it has our name attached, it has dire consequences for our good name.
Identity fraud: Young people are increasingly victims of identity theft - and often it is someone we know. Typically, someone uses our identity to secure credit in our name - mobile phone accounts, credit cards, store credit - in some cases even mortgages.
To avoid the disappointment and embarrassment of finding out about our bad credit rating only after being declined credit, it is recommended we check our credit file for free every 12 months to ensure there are no black marks against our name, just as we would check our bank statements or our super account.
We can request a copy of our credit file for free from the major credit reporting agencies - Veda Advantage, Dun & Bradstreet or Tasmanian Collection Services (if we are Tasmanian). This will be provided within 10 working days - or for a fee it can be provided urgently.
The consequences of a bad credit rating
A bad credit rating sticks. Many times we will find we are black listed from credit for a five year period following a default on our record. Even having too many credit enquiries or a default from a simple unpaid phone bill can be enough to be refused a home loan with most lenders in the current market.
We should think of everything we want to achieve in the next five years. Maybe we would like to buy property, start a business, buy a motor vehicle, borrow money for travel, or even just take out a credit card. The chances of us being able to do this are greatly hindered with a bad credit rating.
A clear and healthy credit file really is the ticket to financial freedom.
How to repair our credit rating
If a credit file check does uncover some nasty surprises - it could be possible to repair the damage done by contacting a credit repairer.
If a default, writ or Judgment has errors, has been entered unfairly, unjustly or just shouldn't be there at all, a credit repairer can help to remove the offending black mark and clear the file - something which we could find very difficult to do on our own.
Most times a credit reporting agency will tell us that defaults are never removed, but can be marked as paid. We are then stuck with a dodgy credit rating for 5 years.
But we shouldn't have to put up with it, as it is possible to have many blemishes removed. Once our credit file is blemish free, here are some tips to keep it that way: credit file is blemish-free
- Make all payments on time. This is the easiest way to ensure there are no discrepancies or defaults on our credit file. If we are unable to make a payment on time, we should contact the creditor. They may be able to set up a payment plan for us until we get back on your feet.
- Regularly obtain a copy of our credit file - once a year is recommended.
- Sign up for Veda Advantage's Alert system. For approximately $50 per year they can send us a copy of our credit report and email us of any changes made to our credit file within the 12 months of membership.
- Keep credit card limits within a set budget. We shouldn't be tempted to accept the sky high limits some banks offer us, as it could encourage us to spend needlessly and blow out our budget.
- Be aware of excessive credit enquiries. If we are not sure about our credit health, we should get it checked before applying for new credit. Declined credit applications on our credit report can hinder our chances of obtaining a loan. Some lenders are rejecting loans for as little as two enquiries in 30 days, or six enquiries within the year.
- Don't shop around for credit. We should only apply for credit we have full intention of pursuing. Every application for credit will be noted on our file, but it does not say whether the application was approved or declined. It could look to creditors like we have been declined multiple times.
For more help with your credit rating, and to fix your bad credit rating, contact us. MyCRA is Australia's leader in credit rating repairs. We permanently remove defaults from credit files.
Article Source: http://EzineArticles.com/expert/Lisa_Brewster/1072063
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