How Your Credit File Can Impact Future Borrowing

Phil Snedden
Phil Snedden

I recently put up a video on Facebook to talk about the importance of keeping a clean credit record, and I would like to provide a little more detail.

The reason I’m giving this so much attention is that over the past 12 months I’ve had a number of clients impacted by adverse credit behaviour that they knew nothing about.

Most of the time it’s due to late repayments on existing credit facilities.  If you are more than 14 days late on a repayment for a personal loan, credit card or mortgage, it’s going to be recorded on your file and will negatively impact your score.  Late repayments will stay listed on your file for 2 years.

The other thing I’m seeing is multiple credit enquiries for new personal loans, ZIP Money, credit cards (and to a lesser extent, mortgages).  A lot of the time clients have been having a quick look online to see if they are eligible with different credit providers, and this results in a credit enquiry each time.  These enquiries stay on your file for 5 years.  The more enquiries you have, the worse your score will be.
This credit reporting change, called comprehensive credit reporting (CCR), was rolled out in Sep 2019, which is why many are not yet aware of the impact it can have on their future borrowing.Credit Score


So what is the impact of a poor credit score?

Well, multiple enquiries and/or adverse repayment history does not always result in not being able to get a loan (although it can), but it will limit lender options which can result in higher interest rates. Sometimes it will mean having to delay a loan application for 6 months or more until the credit record improves.

What should I do going forward?

I always recommend that you set up direct debits or automatic transfers to prevent any late repayments for existing credit facilities.
If you find yourself in a situation where you know you are going to be late on a repayment, call your credit provider to explain the situation and come up with a plan.  This may prevent the late repayment from being reported.
Don’t complete multiple credit card or personal loan online application forms.  Reach out to your current bank if you’re looking for a credit card, or give me a call if you need a personal loan or car loan.  I can check your credit score without it resulting in an enquiry, and can let you know if a lender is likely to lend based on your circumstances

What does my credit report look like?

You can access a free copy of your credit report via the Equifax platform here.  This is the same provider most of the banks use when determining if they will lend to you.

As always, if you need any assistance, you’re welcome to give me a call.

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