Mortgage Blog

By Nick Gardner 

From: News Limited newspapers February 23, 2010 9:32AM

WE all have a credit record that collects data about us, but few of us know what it says or what is allowed to be shown.

Here are 10 things you should know about the system, and what is going to change when new laws come in next year:

1. There’s no blacklist

At the moment, your credit record simply details “bad” behaviour such as defaults, bankruptcies and court judgments. Different companies assess you in different ways, so somebody may get refused credit by one company, but accepted by somebody else.

2. Positive reporting

Currently, credit agencies collect only negative information such as defaults and bankruptcies but under comprehensive reporting, credit agencies will be able to collect extra information, including repayment histories. “So even if you’ve had trouble in the past, you will be able to work off much of the impact of any earlier misdemeanours,” says Christine Christian, chief executive of agency Dun & Bradstreet.

3. Don’t be lateComprehensive reporting will capture more bad behaviour. Late payments on credit cards or utility bills, even if just a few days late, will be noted.
 

4. High limits hurt

It’s the outstanding limit on your credit card, not the balance that counts. “This can be particularly damaging when applying for a mortgage because having a $10,000 limit even with nothing owing can reduce the amount you can borrow by tens of thousands of dollars,” says Mortgage Choice broker John Manciameli.

5. Offences aren’t equal

Dun & Bradstreet says there is a sliding scale for offences. For example, a default from five years ago is less damaging than a default in recent months.

6. A long recovery

Defaults stay on your record for up to five years and bankruptcies for up to seven. A default a late payment of 60 days or more can severely impact your ability to get credit.
 

7. Shopping around

If you go from shop to shop and allow the assistant to check if you would qualify for credit, this is logged. Most lenders interpret these as refusals, even if you didn’t buy anything.
 

8. Small defaults count

Even a default worth just a few dollars on a mobile phone bill could result in the refusal of a mortgage application later on.
 

9. Divorce debt

If you have joint accounts, even in divorce you will be equally liable for the debts and your credit file damaged. “You need to be very wary before entering into a joint agreement over which you have little control,” Christian says.

10. Checking is easy

Check your credit record regularly to ensure it is accurate. Big agencies such as Dun & Bradstreet or Veda Advantage offer free access to your file in about 10 days.