Your Credit History - How can it impact you?

When it comes to credit files and what's on them, most of us really don't know. Suprising when you think that your individual credit file can dictate whether or not you are successful in getting a loan, even if applying for particular jobs which require a clean credit history.

Often I've worked with clients in obtaining finance for them, be it a home loan or a personal loan and often they are suprised to find that they're credit file has a blemish on it. What this means a lot of the time is that their application for finance has been knocked back, what's even scarier is that some of these clients have been knocked back for a default which was as small at $75.

A default is simply a bill from a service provider which was not paid, once it has aged for approx 90 to 120 days it is then listed on your credit file as a payment default. How easily can this happen? Far too easily, especially when it comes to telecommunications providers who are notorious in listing people as soon as they cross a certain time frame of non payment.

Here's a real life example for you, person A moves premises and simply forgets to advise their telco provider of their new address. By the time they settle into their new place, unpack boxes and get accustomed to their new surroundings a few months have gone by. All of a sudden they have been listed by their provider for non payment.

Is this the Telco providers fault, no! The onus is on the individual to ensure that all utility and other companies they receive bills from are advised of their current address.

There are some simple things you can do to ensure this doesn't happen to you, it's as simple as popping into your local Australia Post store and filling in a mail redirection form. The cost is minimal and you can have mail redirected for 3, 6 or 12 months. For the cost of this service as compared to having a listing on your credit file I believe it is worth every cent!!

When you have a default on your credit file, no matter how great or small the listing stays on your file for approximately 5 years. Let's take a quick look at how a default can affect you:

1. Restricted ability to obtain a home loan
2. If you do obtain a home loan you may need to get it through non conforming lenders who charge a higher interest rate
3. Potential to not be able to activate a mobile phone service (post paid service)
4. Impact on obtaining certain jobs which require a clean credit history

These are just some of the impacts that a listing on your credit file can have. Having bad credit is no laughing matter as the ramifications are far reaching.

Even if you do not have a default or a listing of any type on your credit file there is a record kept of every single application for finance, for example if you were to go to several different lenders for a personal loan and all of them performed a credit enquiry then your credit file will show all of these transactions.

Even though you did not obtain credit your credit file shows all of these applications, now the impact even this can have is that subsequent lenders will have a concern about your activity and in a lot of cases will refuse you credit based on high levels of applications.

To obtain your credit file with detailed information you can simply click here and order it online. It will be the best money you've spent in a long time and the information contained will actually suprise you.

Hope this has helped highlight the impact of having a blemish on your credit file and I invite you to ask me a question and I'll be happy to assist.

Credit Crisis - Is there More to Come?

With the credit crisis still going through the throws of settling down we are yet to see the full impact of the US meltdown. The impact of the credit crisis is only beginning to be felt by the global economy, more so it is the individual consumer who will pay for this in the long run.

At this stage the Australian economy has slowed down in the finance sector, the property sector and we have also seen substantial impact in the share market. What we are yet to see is the impact from an unemployment perspective and also from a home loan default and personal credit default perspective.

Yes we are seeing more and more martgagee auctions but is the smaller ticket items such as credit cards, store cards and personal loan going into default which will impact consumers for years to come.

The amount of people in Australia which have a listing on their credit file will skyrocket over the coming twelve months as people struggle to repay debt which was accrued during a time of low interest rates and lower cost of living in general.

This was ok during this period of lower interest rates and cost of living although now where a home loan costs hundreds of dollars more per month and the average fuel bill is now an average of $100 per month more the amount it costs just to maintain these repayments has seriously sapped the disposable income which was once available.

Where does this lead from here? In many cases it leads to people juggling money between credit cards and potentially making late payments on their bills that are due. If this cycle is not broken quickly by way of cutting down on all unecessary spending or earning more money then these late bills start to pile up and can quite easily turn into a serious debt issue.

Once a bill is more than 90 days in arrears the provider of the service has the right to place a default listing on your credit file and this can take up to five years to come off your credit file even if you pay it in full at a later stage.

I have helped many clients break this cycle by way of a refinance and more specifically the consolidation of debt in their home loan.

I will be writing up more information on the impact of a credit listing in my next blog due out very soon.