Did you forget to pay your electricity bill last month? Perhaps you’ve got an unpaid phone or credit card bill? Or have you ever applied for a credit card and been knocked back?
Chances are, if you have done any of these things, or something similar, it’s all on file for a home loan provider to see.
If buying a property, or upgrading to a new home, is your goal, it’s crucial to understand how your credit file can influence your home loan eligibility and how you can keep your record in prime condition.
What is a credit file?
A credit file is simply a record of your dealings with credit providers.
The information contained in the file includes all credit applications made by you in the past five years, existing loans and debts, default notices where payment hasn’t been made in over 60 days, as well as fraud convictions, court notices and bankruptcy orders.
As your file is used by credit providers – i.e. home loan lenders – to determine your creditworthiness, it’s essential to keep your file as blemish-free as possible.
Simply missing an electricity bill or regularly paying a phone bill late are examples of items that may be recorded on your credit file and could affect the loan amount you’re eligible to borrow – or possibility even result in a lender rejecting your home loan application altogether.
As these ‘black marks’ can remain on your credit file for a five year period (or for serious offences up to seven years), you need to keep on top of any debts and bills and pay them by the due date.
Accessing your credit file
You can view a copy of your credit file on a number of websites, including www.mycreditfile.com.au and www.dnb.com.au.
These providers will charge you for an instant look at your file, but you will be able to see it for free if you’re happy to wait around 10 days.
What if my file is tarnished?
As any credit history blemishes will stay on your file for several years, it’s important to tackle any black marks immediately. Be sure to pay any listed outstanding bills right away and contact the credit agency to ensure your file is updated accordingly.
To just what extent any blemishes will influence your home loan application will depend on their severity as well as every lenders’ individual loan criteria.
Because of the difference in credit assessments, one lender may approve your application, while another may not. The best strategy is to keep on top of all debts and bills now, and avoid any further blemishes down the track.