Understanding your credit history

Understanding and taking control of your credit history (also called credit rating) can make a big difference to your financial future.

What is credit history?

Your credit history is how lenders check on your financial health before they approve loan applications. It’s a combination of your credit score and credit report.

Credit report

Your credit report includes personal details as well as information relating to any credit applications you’ve made and loans you’ve held. It covers things like whether you’ve met your credit repayments or if you’ve ever defaulted on a loan or been bankrupt.

Credit score

The details in your credit report are used to calculate a numerical credit score between 0-1200. The higher the score, the better the rating. As the details in your credit report change, so does your credit score.

Some of the day-to-day things affecting your credit report and score include:

  • applying for credit or changing your credit limit
  • closing a loan or credit account
  • late repayments.

Tip: By clicking through a loan or credit application online, you may have applied for credit without realising it. Pay attention to what you’re agreeing to, as too many applications could leave you without approval for a loan when you need it.

How do you check your credit score and report?

Your credit score and report aren’t mysterious documents only available to lenders. It’s a good idea to find out what your credit rating is, not only if you’re planning to apply for a loan, but so you can improve it if you need to.

Check your credit score for free with any of these three national credit reporting bodies:

You can also get a copy of your credit report.

Tip: It’s free to request your credit report or score once a year, but if you need it immediately you’ll pay a fee.

Building a good credit history

Building a good credit history isn’t difficult once you know what affects your rating. Try to make informed financial decisions and keep your credit on track by:

  • paying your bills, rent and loans on time
  • not applying for credit unless you need it
  • keeping your credit card limit manageable and paying the balance in full each month.

What to do about a low credit score

A poor credit rating doesn’t have to haunt you forever. You can get back in control and turn things around. Start by talking to your bank or a financial advisor for advice on what they’d need to see change in your credit report to lend to you, and how you can get there. You may want to look into any outstanding debts and think about a debt consolidation loan. Your bank should support you to make the changes for a brighter financial future.

Tip: Don’t fall into the trap of pay day lenders or high interest loans as a way out. It may create a vicious circle of debt that’s hard to keep up with.

How long will a debt or default stay on your credit file?

The more serious the default, the longer it will be on your file. For example:

  • 7 years for serious defaults including bankruptcy
  • 5 years (after the bill is paid) for minor defaults like overdue accounts and court judgements
  • 4 years for court writs.

Tip: It's a myth that checking your credit score can put a black mark on your credit report.

New laws on positive credit reporting

From July 2018 all Australian banks are subject to new comprehensive credit reporting (CCR) legislation.

The shift to positive credit reporting means your credit history will reflect the bills you pay on time and your positive financial history – not just any financial hiccups. It means lenders have access to more information about you including current accounts, your repayment history and when you paid any default notices. Proving your history of smart money management may help you negotiate a better deal on your loan or credit.

Talk to a bank with real people making decisions

Knowing your credit score means smarter financial decisions and avoiding rejection for loans or credit cards. If you’re ready for a loan, get a copy of your credit report. If you need advice on improving your score and history, talk to QBANK about a plan to move forward. Call our team on 13 77 28.

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