When ever you choose to have something financed (home, car, furniture, etc.), the seller will naturally want to run a "credit check" on you. But what does that mean? What is listed on a credit report? How far back does the report go? What if there are errors, what do you do?
A credit report is a historical listing of all financial transactions you have had for the past five years. Every credit card you own or owned, anything you financed, all types of loans, defaults, late payments, serious credit infringements, and information on public record are all listed on your credit report. Call it your "report card" for personal financing information. And just like school, you get graded upon your performance or lack there of. But many times, the information listed is too old or inaccurate or just plain wrong; and only you can fix it.
One of the most neglected aspects of anyone's life is the proper management and maintenance of their credit history and credit report. Why? Because no one ever does it, no one ever bothers. And yet, just like the all too often forgotten yearly physical, you should be checking and adjusting your credit report every year.
The reason why should be obvious – Ever been denied credit? Well, that denial was probably based upon your credit report! Here are just a few reasons to check your credit history at least once a year
- Identity Theft – That's right, someone right now could be ruining your credit because they we able to steal your Id information. This is especially important if you have made purchases on the Internet or have recently been robbed. Just this alone should be reason enough to check your credit history every year.
- Misspelled address information – Always causes the red flag to go up. Be sure all names, addresses and phone numbers are properly spelled.
- Removal of old history – Your credit history should only go back 5 years. Maybe you had some problems several years ago but have since cleared up all debts – only the pervious five years should be listed on your report. Judgment debts and Bankruptcy are usually listed for 7 years or more.
- Disputes – Credit and collection agencies are quick to report defaults but slow to list it as paid. Be sure and correct any disputes immediately
- Balance verification – Make sure the balance is accurate and all accounts which are paid off do indicate it.
- Credit applications – Too many spells trouble to financing entities. Make sure you remove all erroneous applications. Note: If you have been car shopping recently, make sure to remove all applications – Every dealer you visited probably ran a credit check on you.
When you are applying for a home mortgage, your credit report is the main body of information used to determine your ability to pay your loan. If you haven't gone over your credit report and cleaned up any discrepancies, you are just asking to be "grilled" about certain issues and possibly denied.
There are three primary credit reporting agencies in Australia: BayCorp Advantage Ltd., Dun & Bradstreet, and Tasmanian Collection Service. You are entitled to a free copy of your credit report and all agencies must make the effort to give you access to your report. Usually it takes any where from 5 to 15 days to receive a copy of your credit report once the agency is in receipt of your written request. If you are willing to pay a small fee, you should be given access to your credit information almost immediately by using the agency's Internet website.
Once you receive your credit report, go over every single centimeter of it in order to find any problems. Making a check list of items to look for can help you with your search. Such a list might include the following:
- Make sure all your personal details are accurate and spelled correctly. More often than not, spelling errors or multiple addresses have caused credit denials.
- Make sure all credit debts are yours! It could be someone with the same name or it could be Identity Theft. If you believe someone has stolen your Identity, please report it immediately to the police, the credit providers and the credit reporting company. Identity Theft is a criminal offense. For more information on Identity Theft, please go to the Ministerial Council on Consumer Affairs site and find the contact information for your local area.
- Check the balances and age of any credit defaults listed. Remember only five years old for defaults, seven years for judgment debts and bankruptcy. Anything older should be removed from your history.
- Repay any outstanding credit defaults if you can – Once you do, ask the financing provider or collection agency to amend your credit information. All though the credit default will still be listed, it will also show you paid it off.
You should always take care of your credit history and in that way your credit report will always reflect the most accurate and current information concerning your responsibility to your debts. If you are denied credit, be sure and ask why; don't just assume it was your credit rating. Especially when applying for a home mortgage, often times denials are due to trying to purchase a home too expensive for your income and debt load.
Hopefully when you go to apply for your home loan you won't experience any problems or credit concerns – If you make sure to review your credit report and clean up any issues, you will have one less stressful thing to think about and maybe even make the approval process just a little bit quicker.