A credit report can feel like a long-lost journal. Unlock it and you might find a bill you didn’t pay, a credit card you maxed out on the first day, or that party you shouldn’t have gone to. It can be tempting to let it stay in the past.
Trust us, it’s better to know. Notes on your report can stay there for up to seven years, and you’ll want to be aware of them before you apply for a home loan. Being prepared well in advance can give you time to improve your credit history before you make the leap.
Even if there are issues you’d rather forget, having all the facts will help you avoid the equivalent of any early-2000s bleached tips regrets.
What is a credit check?
Literally speaking, a credit report is a bunch of pages that reveal everything about your recent financial history. Lenders use them to find out how likely it is that you’ll pay back the money you borrow.
Most of us have a personal credit history maintained by various credit reporting bodies (more on these shortly). It shows basic details like your name, age and address, and relevant information including personal bankruptcies, outstanding debts and unpaid bills.
Unlike some countries, Australians don’t get a credit score, and what banks check when you’re applying for a home loan differs from one to the next. It’s up to lenders to decide whether you’re a risk based on what you’ve borrowed, any defaults on financial agreements, and how much credit you’ve applied for in the past.
The credit “score” you need for a home loan depends on all these factors, plus your work history, income, existing obligations and so on.
Check your credit record for free.
The good news is that you can pick up a copy of your credit record for free from credit reporting bodies including Veda , D&B and Experian . If you live in Tasmania, contact the Tasmanian Collection Service . You can also pay to get your report faster, if you’re keen to get things in order right away.
Reviewing your credit record can also be a money saver. ME home loans are free from application fees (solicitor, valuation and agent fees may apply) but most lenders do charge fees that can run into hundreds of dollars. If your application gets a thumbs down because you didn’t check your credit first, there’s a good chance you’ll lose your money.
What if there’s a problem?
So, you have your report. For the most part, you’ve been responsible and made payments on time. But there’s a blip: four years ago you moved and forgot to pay the last gas bill, and now there’s a black mark listed.
There are options available if it turns out your credit record has a few dents. If any outstanding bills are noted, contact the provider and ask about a payment plan to help clear the debt. If the report contains any errors, contact the credit provider immediately to explain the situation.
As a first home owner, choosing a loan with a competitive rate is a smart move, and making yourself an attractive proposition to lenders by having a good credit record will help you get the best deal. Get to know your credit report. Really pull it apart. What does each section mean? How do you know if it’s “good”? If you have a co-applicant, how are they tracking?
If you have to look through your fingers with all the lights on, that’s okay – it can feel pretty scary. But having all the facts means you can approach your bank boldly, knowing you’re the kind of applicant lenders want.
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.