How good is your credit file looking?

If you haven’t really thought about your credit file for a while but you’re hoping to buy property or change banks soon, then tune in. Find out why your credit file matters (actually, quite a bit).

One of the things that lenders look at when we want to borrow some money is our credit file.

Because lenders don’t know you from a bar of soap, they use readily available credit reports as part of their review to understand your financial history, including any previous credit applications you’ve made and how on-time your payments have been.

So if you’re in the market to buy a property, or want to change banks for your loan, here’s why we think it would be worthwhile for you to check your credit file.

What is a credit file?

A credit file, or also sometimes known as a credit report, is a detailed record of your credit history. It includes information about the types of loans you’ve applied for (such as credit cards, car loans etc.), which loans you’ve opened and how good you’ve been at repaying those loans. Organisations that let you have a service in advance of payment, like banks, phone & energy companies, can provide details about your payment habits to credit reporting ‘bodies’. These organisations then compile your credit file.

Your credit file may also include a rating, or score, as a way of combining your credit data into a simple value for quicker assessment. Often this can be a number that is meant to represent how ‘credit worthy’ you are. Generally, the higher the score, the better. 

How do lenders use your credit file?

When you apply for a loan, the lender will access your credit file (after you give them permission during your application) and use the information as one of many tools to help it decide whether to lend to you, how much to lend and on what terms. They’ll also consider things like what you earn, your spending, what you own and what you owe, and your credit file plays a big part in this assessment.

Some larger lenders make decisions with a very heavy focus on the credit file, rather than the real people behind it. At HoLo, we’re not fans of that approach, so we try to mitigate this in our dealings with banks by talking to them about our clients and looking for agreeable solutions.

Does your credit report show that you’re good at making repayments?

Absolutely! Changes came into effect not that long ago, requiring banks to pass on all the good information about your credit history, not just the bad stuff. Instead of just sharing the negative things like defaults, now your credit report includes positive things such as your recent repayment history. So if you haven’t missed a payment over the past couple of years, it’s going to show up really nicely for you. This gives lenders a clearer picture of your credit history, when they’re making their decisions to lend you a whole lot of money.

How to check your credit file

When getting ready to buy a property, we reckon it’s always good to check your credit file, to make sure it’s squeaky clean & to see if anything has been added that you weren’t aware of.

In some instances, a credit report can contain an incorrect entry, which is good to pick up early, so you can get it fixed. If you do notice something is amiss, you can find tips for fixing your credit report on the moneysmart website. You can easily access your credit file online through those credit reporting bodies: Equifax, Illion or Experian.

How to keep your credit file in tip top shape

And finally, here are a few tips that you might find helpful to keep your credit file looking awesome for your next property purchase:

• pay your bills and loan repayments on time

• reduce the excess limits on any credit cards 

• cancel credit cards or personal loans that you don’t need

• limit making new loan applications, including any credit cards or personal loans

• make sure you update your address with your phone & utilities companies if you move

Like to know more?

We can help you decipher your credit report and answer any questions you might have, or even on how to improve it (if it’s looking a little sketchy).

If you’d like to know more, book an appointment or contact us