How Active Credit Reporting Can Impact You
Learn everything you need to know about the Federal Government Home Builders Grant here
Taking on debt at a younger age to buy that new car or spending up on a credit card might seem like a good idea at the time. But it may come back to haunt you in the form of your credit rating.
In the past, it was often said that in order for you to get approved for a home loan you needed to have a credit card or some sort of credit in place so you had a ‘history’ for the banks to look back on.
This, however, is somewhat of a myth, generated from the United States where debt is approved much more freely than here in Australia.
In Australia, if you’ve never had any debt, that can actually be a good thing.
Banks used to simply look at your history over a 4-6 month period, but today that has changed also.
Banks now use Active Credit Reporting and it has changed everything, assessing your financial data history for at least 24 months prior to your application.
What is Active Credit Reporting
This is an automated process which gives you a rating between 0 and 850, based on your credit history.
Your credit history is a record of your financial information, including applications, current credit accounts such as home loans, car loans and credit cards, credit defaults such as overdue bills, and past bankruptcies.
A score of 850 is by far the best. Anything under 600 then lenders may start to assess if you’re a risky investment.
How can I maintain a good credit rating?
You can maintain a good credit rating by:
- Paying all bills on time, no matter the size of the bill
- Ensuring outstanding debts are being regularly and routinely repaid
- Not applying to a large number of lenders for loans or credit
- Keeping your credit card balances under the limit
- Making credit card minimum repayment son time
Will taking a COVD-19 related loan deferral affect my credit rating?
The Australian Banking Association has stated that pressing pause on your home loan repayments due to the coronavirus crisis, will not impact your credit score provided payments were up to date prior.
However, there are other things you should consider before hitting pause, which you can explore here.
How do I check my credit rating?
It’s always a good idea to know what your credit rating is before you step into the preapproval process.
Keeping your finances as clean as possible will ensure you’re in the best position to be approved for your home loan.
Investigating your credit score also gives you the opportunity to see if a credit repair service can remove any negative listings.
At North Brisbane Home Loans we have access to Active Credit Reporting and can assist you with finding out your credit rating and how this may impact your borrowing capacity.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
