Most know we have a credit file lenders access when making decisions to lend us money. What many don’t understand is how it works and what makes a good credit score.
You could be forgiven for thinking paying your bills on time meant a good credit rating however, prior to the 1 July 2018 introduction of comprehensive/positive credit reporting (CCR), your credit file actually contained no data for on time payments.
CCR means lenders can now provide positive credit data to credit reporting agencies, and for the major banks this is now mandatory. Your credit file now contains additional information – date loans started and finished, current and previous credit limits, and your monthly repayment conduct for the past 2 years using ‘scores’.
“O” means your monthly repayment was made on time (or within the 14 day “grace” period). From there the scores start at 1 (15-29 days overdue) through to 6 (150-179 days overdue).
Even with the grace period on reporting, it’s important to pay your cards and accounts on or before the due date with lenders generally needing most recent statements, and zero tolerance on late payments.
You can obtain your credit file for free by visiting the Equifax website then clicking on the free report link. A good broker can help you understand your report.
With talk in the media around recent RBA official rate cuts, and likelihood of more to come, it’s easy to overlook the great fixed rates on offer. For the first time we are seeing fixed rates beginning with 2 for terms up to 5 years. If you have a sizable debt now a great time to discuss the costs and benefits of a fixed home loan, as history tells us that when variable rates look like turning the opportunity to secure a cheap fixed rate will have passed.