Credit Rating

If you’ve ever been really late in paying a bill or defaulted on a loan, then chances are it has been recorded on personal credit rating. And while you may not think too much of it, you can be sure that every financial institution in the country takes it very seriously.

So when the day comes to apply for a new form of financial credit, like a credit card, car loan or even mobile phone plan, that blemish might see you get knocked back or charged extra interest because you’re a “higher risk”.

You see, the company lending the money will run a credit check on your application, and if you’ve taken any form of credit out in the past they will receive a report on whether you pose a credit risk or not.

This report outlines things like whether you’ve taken too long to repay a debt, whether you have any current overdue accounts and other personal details they deem relevant.

So if you’re unsure of the details of your credit rating, it’s worth taking the time to check it, especially if you’re planning on borrowing any time soon.

How to check your credit rating

Credit agencies are required to provide you with a free copy of your credit report every 12 months, or if you have recently been rejected for credit.

Your credit report includes information on debts like your mortgage and credit cards, all the way down to your monthly bills. It also includes any application you make for credit, any time you have defaulted on a debt and if you are guarantor for someone else’s loan.

Two of the main credit agencies are Veda Group and Dun and Bradstreet. They each have a specific process to follow to request a free copy of your credit report. If you’re in a hurry, you can also go to Get Credit Score (www.getcreditscore.com.au) for a free credit score and quick summary of your credit report.

This online service is a handy way to get an idea of what your credit report looks like and how you appear to lenders when they’re reviewing your application for credit.

Improving your credit rating

Poor credit ratings can be caused by missed or late payments, defaulting on a debt, being rejected for a loan, or mistakes made by a creditor or credit rating agency.

Other things, like a patchy employment history, having an excessive amount of debt, or regularly changing your address can also weigh you down.

If you have mistakenly received a black mark against your name, get in touch with the ratings agency or creditor directly (if they have incorrectly listed you as defaulting or being late on debt repayments) and request to have this rectified.

Once you have checked that your record is accurate, you can start improving your financial situation, which starts with paying every bill and loan installment on time.

While overdue or defaulted debts won’t be removed from your record until five years have passed, it’s good practice to turn over a new leaf and start building a positive track record now.

From there it’s all about staying on track and limiting the amount of new debt you take out. Don’t apply for needless credit cards and work through a budget to understand your situation before applying for any new loan to ensure it’s worthwhile and within your means.

If you have a patchy credit history, it may be worth waiting to apply for a serious debt like a home loan until you have been at your current job and residence for at least a year.

By keeping your credit record clean and limiting the amount of debt in your life, you’ll be in the best position to negotiate favorable terms when the time comes to borrow again.

COPING WITH BACK TO SCHOOL EXPENSE

It’s an expensive time of year. Plans to get the Christmas credit card back under control can take a massive hit if you have kids heading back school and those extra expenses.

Here are some of our easy ways you can cut the cost of you children’s education.

• Before you hit the shops round up notebooks, pens, pencils, pencil cases, backpacks, and lunch boxes from last year that are still in good condition and take an inventory. Compare your inventory with the school supply list and buy only what is needed.
• Shop with a list for each child, and stick to it. Also, ask your kids to help you keep track of what you buy so everyone knows when it’s time to stop shopping.
• Get the high school booklist as early as you can and track down second hand copies. Try second hand bookshops or speak to parents of children in the grade above.
• If your children attend an independent school find out if you get a discount if you pay your fees early. If you don’t have the money for fees now speak to the school about a payment plan instead of charging them to your credit card.
• Don’t buy a year’s worth of school uniforms in January. Spread out your spending and wait till autumn to buy their winter clothes. It allows time for your children to grow and you to save.
• Make lunch orders and visits to the school canteen a special treat instead of an everyday occurrence. You will save if you plan ahead and pack your kids a cut lunch and recess snack from home.