What is a Credit Report?
Credit reports are a record of all your credit transactions and creditworthiness.
According to the Office of the Australian Information Commissioner, a credit report is “a document that a credit reporting agency produces using information provided by credit providers or other sources.” Your credit report will list any inquiries you have made in the past, such as when you applied for a loan or credit card.
You can strengthen your credit score by being proactive about checking your credit report.
What is a credit report?
Credit reports include the following:
- Personal Information (name, address, employer, date of birth and name).
- Information on consumer credit liability
- You can use any credit product you currently have.
- History of repayments for each product.
- Infractions and defaults.
- Credit applications and inquiries.
- Credit information for commercial credit.
- Information about public records
- Requests for credit reports (number of requests, frequency, and who else has seen it).
The report will sometimes detail situations where repayments have been made, for example, defaults, court proceedings, or bankruptcy.
Credit score and rating vs. Credit report
Credit rating, credit score, and credit report are all often used interchangeably. However, they are not the same.
- Credit report records the credit history of an individual.
- The credit score consists of a numerical value based on the personal and financial data detailed in the report.
- Credit rating refers to the range or ‘band’ that a credit score is placed in.
A credit report is a precursor to a score of credit and reflects a borrower’s reputation. Credit scores and ratings will change when a credit report has been updated.
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Credit bureaus in Australia
Equifax, Experian, and Illusion are the three main credit bureaus in Australia that collect Information about your credit score.
The credit reporting agencies are independent, and each receives data from different lenders and sources. Therefore, the information you see in your report will vary.
What is Comprehensive Credit Reporting (CCR)?
In 2018-2019, Comprehensive Credit Reporting was implemented, requiring all four major banks (Westpac, NAB Commonwealth Bank, and ANZ) to participate in the credit reporting system fully. This inclusion provided lenders with more insight when assessing the true credit standing of a borrower and their ability to repay a loan.
Credit data, including negative and positive, was made available to lenders. They also received additional Information about the account, such as when it opened or closed and its type of credit.
According to Money Magazine , approximately 95% of consumer credit accounts are reported in detail. Nearly 60 financial institutions report data to credit agencies.
This might sound daunting, but it’s actually a win for both the lender and borrower. Credit is only approved if you have a track record that shows you are capable of handling it.
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How to obtain a free credit score
According to a study , half of Australians never check their credit reports. This means that they are missing out on important information they could have used to make better financial decisions.
Finding out your “creditworthiness” is fairly easy. MoneySmart, a government website, suggests requesting your credit report at least once a calendar year. You can get a copy of your credit report for free every three months.
Contact the credit reporting agency to request a copy of your credit report.
- Equifax, phone 138 332
- Experian phone number 1300 783 66
- , a billion. Phone 1300 734 806
A credit report can take between 2 and 10 days to be delivered. Only request copies of your credit report from Australia’s major credit reporting agencies. Be wary of providers who try to charge for the account or ask for credit card information.
It is wise to review your credit report regularly. You’ll be able to stay on track, and you will have the opportunity to get future credit at a low-interest rate. You can also review your report for any errors and challenge them if needed by contacting credit agencies that have issued the statement.
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Credit building: Simple steps
You can borrow money on credit with the promise that you will repay it later. It’s easier to get a loan or a car with good credit. With a high credit score, you can save money on interest rates and fees.
Consider these steps if you are building your credit history.
You can use your credit.
We know it’s a contradiction. It’s a common myth that those with the lowest credit scores are in the best financial position. This is not necessarily true. Don’t be scared to apply for a starter card or become an authorized user on someone else’s account.
You will automatically affect your credit score every time you use a card or a loan, so be sure to do it strategically. Apply for only one account at a given time, and pay all your bills on time.
Take into account your credit mix.
All credit is not created equal. Credit agencies recommend combining different types of credit to show you can manage repayments.
Consider revolving credit and installment credit.
- A revolving credit does not have a set repayment date. A credit card is an example.
- Instalment Credit has a fixed loan amount and repayment schedule, like a car loan.
Credit mix may not be the only way to improve your rating, but it will show lenders that you have a diverse credit history. The best credit mix will be what it is comfortable with.
Face your financial fears.
Credit is not a bad thing. When used properly, credit can help you reach your dreams. It makes it easier to buy a home, start a new business, or travel the world.
Don’t let your fear of learning your credit score hold you back. You can see how lenders view your credit score and make the necessary lifestyle and financial changes to improve it.
Next time you apply for a new loan, a mobile phone, or a home, if you want refinanced, or if you need a credit line, then thank yourself.