Get the low down on credit files

As you may be aware, whenever you apply for credit or a loan, you'll either be approved or declined. The checks that credit providers do to make that decision include checking your credit file. What exactly is a credit file and why does it matter?

What are credit files/credit reports?

A credit file (sometimes called a credit report or credit history) is a record of any time you've ever applied for credit or a loan, even if you weren't approved, and whether you've ever had any payment defaults. Lenders and credit providers check your credit report as part of assessing whether you are able to repay any loan or credit you're applying for.

Credit providers will take your credit file history (amongst other things) into account during their assessment, so it's important for you to know what is listed on yours. Accessing a copy of your credit file will also help you to understand the impact your credit activity has in the eyes of credit providers.

What is listed on my credit file?

Personal identifying details such as your name, address and date of birth are listed, along with details of:

• Any current credit account information – the type of account, open date (and close date if applicable) and credit limit
• Any credit inquiries – whether you've been successful in being approved for that credit or not. 'Busy' credit files with a significant volume of credit enquiries can be a red flag for lenders assessing your ability to repay the credit you're applying for.
• Your repayment history on any credit accounts – outlining whether you've paid the minimum repayment on time or not. This includes listing any payment defaults; generally, this is where a payment has been missed for 60 days or more and has not been remedied. Payment defaults are a main point of interest for lenders, which is why you should try your best to avoid them.
• Any commercial credit details – these will generally only be on the credit files of sole traders, business partners, property investors or company directors and will outline any credit enquiries, overdue accounts and notes regarding matters under investigation
• Public record information – covering any publicly available information on bankruptcy, insolvency, court writs or judgements or debt agreements you may be involved in

How can I see what's on my credit file?

All credit reporting bureaus are required by law to provide a free credit file annually. You can apply for one online by providing your information to any credit reporting bureau, such as Equifax (formerly known as Veda). Most free services take up to 10 days to return your credit file to you, but you can pay extra to have it delivered more quickly. It's a great idea to put a date in your diary to request this yearly. When you receive your credit file, check it thoroughly for any issues or errors. If an error has been recorded, see our note below on how to repair your credit file.

Identity theft is an increasingly common issue in Australia. Accessing and checking your credit file for any anomalies yearly will give you peace of mind that your identity hasn't been compromised.

How to keep your credit file clean

The best ways to maintain a good credit file are to pay your bills on time, only apply for credit when you really need it and always ensure the contact information your credit providers have is correct. Making sure your address is up to date with any credit providers is particularly important as this means the requisite default notices can be properly sent. To limit the impact of negative ratings on your credit file, always make it a priority to update your details as soon as you can.

If you're experiencing financial hardship and finding it hard to meet your financial commitments, talking to your credit providers should be a matter of urgency. They may be able to help which, in turn, may reduce the risk of you having a default recorded on your credit file.

How to repair your credit file if it's not looking so good

Mistakes can happen. We may miss a bill or have a dispute with a credit provider which could potentially lead to a default in your repayments. If you see an error on your credit file, you can ask to correct your credit reporting information through a variety of free options:

• Via the financial institution's privacy area or internal dispute resolution process – financial institutions are required to investigate if a complaint is raised, so get in touch with them first.
• Via the financial institution's aligned external dispute resolution service (like an Ombudsman) – you can get a free, independent review of your complaint from the external dispute resolution service.
• Via the Office of the Australian Information Commissioner – as your credit information constitutes 'personal information' under the Privacy Act, you can raise a complaint with the Office of the Australian Information Commissioner and have it reviewed for free.
• Via any Credit Reporting Bureau (such as Equifax) – you can have a credit dispute reviewed by any Credit Reporting Bureau.

There are credit repair companies who advertise to fix your credit file, but they often charge while the above options are free!