With Comprehensive Credit Reporting having been introduced in 2018, there is more ways your credit can be affected by your repayment behaviour. Both Good and Bad.

How this works is, if you have a loan or credit card, the account will now show on your credit report, with a 2 year history of payments.  You get a 14 day grace period to make your payment.  If you make your payment within 14 days of the due date, the payment will show as OK.  If you don’t or can’t make your payment this too will show.  There is now nowhere to hide, your payment history is on show for anyone who runs your credit file.  This could prevent you from borrowing money from a Bank or Finance company.  If there is a good reason or explanation and it has only happened once you may be able to explain it away.  If there are several non payments it will get harder, a lot harder. You may even have a exclusion – serious overdue account on your credit file.  This is where you have been late on your payments for 3 months. 

Lenders will want 2 years of clean, on time history for a good report and a favourable Interest rate. This automatically resets as you make your payments, so 2 years of on time payments after you have been late and it is clean again.

The more serious Defaults on a credit report will take 5 years to drop off, if it has been remedied.  This will mean they haven’t been able to come to an arrangement with you to catch up payments and may have passed your Debt on to a collection Team or sold your Debt to a Debt Collector.  This situation will take longer to recover from.  Each default will drop off 5 years after it has been put on your credit report.  But beware, if you have not addressed the situation with a payment plan, Debt Agreement or Bankruptcy, a Debt collector can put a new Default on each time they pursue you for the Debt.  Your credit file could take a long time to remedy unless its addressed.  

By taking action like a Debt Agreement or Bankruptcy no further defaults regarding those Debts can be put on your report.  This will allow your credit report to reset in 5 years.  Taking no action will probably see your credit report stay bad for the foreseeable future.

Can you have a default removed from your credit file?  

You cannot have a default removed if it has been put there correctly.  But if you have a default on your name that is not correct, or put there without due process, then AFCA the Financial Ombudsman can help have it removed.

If you are in an active Part IX Debt Agreement this will show an exclusion on your credit file.  It will automatically drop off at the 5 year 1 month mark, provided you have completed all payments on your Debt Agreement.  You will then have a Fresh Start.   It will change to show you have completed the Debt Agreement.  You can pay out your Debt Agreement earlier, the status will change to PAID, but the exclusion on your  Credit Score will remain till 5 years has passed. If your Debt Agreement is not paid or you enter into a Bankruptcy it will restart the 5 years.  

In the Case of a Bankruptcy that automatically discharges at 3 years, the exclusion on your Credit Score will stop at the 5 year 1 month mark. If the Bankruptcy runs longer it will be 2 years from whenever you are Discharged.

However once you have completed the Debt Agreement or been discharged from Bankruptcy, you will be able to approach specialist Lenders for Home Loans or Car Loans. Contact Money Buckets for Help in this situation.

On the positive side, your credit score will keep increasing with continued good payment.

So, there are some things which can still affect your credit file even if you are on time? 

There are some Loans that will affect your credit regardless if you pay them on time.  Quick payday style Loans and other High Interest loans are seen as Bad Financial Decisions and will adversely affect your Credit Capability.  Be careful of Afterpay credit as well.

Having too many cards or Loans will not be looked upon as a good thing either and may prevent you from borrowing anymore.

 Every time you make an application for a loan or credit card your credit score will drop. These enquiries are listed on your report and question may be asked why you have made so many enquiries, after all, who keeps asking for credit once they’ve been approved?  So don’t just apply to multiple Lenders at once to see what can be done, this has prevented many people from obtaining a Loan even though they were only shopping around.

Money Buckets can check your credit report and asses your loan prospects without affecting your credit report. Contact us now to discuss.