Banks use credit ratings as a tool to determine applicant’s credit worthiness. If they have a high risk profile, it may be necessary to go to a non-conforming lender, which will mean higher deposit, interest rates and set up costs.

As well as personal information, credit reports contain information like employer, bankruptcies, and defaults as well as credit enquiries made recently.

If any defaults show on the file, they will remain for five years and will need explaining when applying. In some cases, they may mean a loan is not acceptable.

Keeping your credit file clear is not difficult so long as you pay your bills on time. A lender looking at the risk involved in approving a loan will obviously want to see a good credit history, and payments that are even a little overdue can impact. A good way to make sure payments are made on time is to have bills like electricity set up via direct debit.

If you are having trouble paying a bill, don’t bury you head and think it will go away. Contact the company and discuss payment options – most will happily organise a payment plan. After all, they would rather have the money a few days late than not at all, and it could save a black mark on your file.

If you need some more information on how to manage your credit report, call me on 0402 203 303 or email me at rob@rwfs.com.au.