The Bad Credit Nightmare Affecting Australian Home Buyers
25 July 2013
Consumers all over Australia every day are faced with surprise bad credit when they apply for a home loan, and according to an advocate for credit reporting accuracy, many consumers get railroaded into living with debilitating defaults on their credit file that simply should not be there.
CEO of MyCRA Credit Rating Repair, Graham Doessel says many home buyers end up angry and disappointed when their finance is declined due to bad credit, particularly when they believe their credit file shouldn't have any black marks.
"While paying your bills on time is the best way to ensure you have a clear credit file, it does not guarantee your credit report will be clear. The nature of credit reporting is that there is much opportunity for human error and these errors are usually not uncovered until people go about checking their credit file. At the time of finance application, it is too late," says Mr Doessel.
He says often consumers who query a credit listing with their Credit Provider are told that credit listings cannot be removed, but can be marked as paid if they have been paid. But he says the ramifications of bad credit are so huge, consumers should not be burdened by them if there are inconsistencies.
"A default - even a paid default - will impact your ability to obtain credit generally for the entire time it is listed on your credit file - which is 5 years."
"If you are convinced a credit listing shouldn't be there, or is inaccurate in some way, then you should dispute it," Mr Doessel says.
5 Steps to Fixing Your Bad Credit History
1. Determine what account the default is for. If you don't have a copy of your credit report, you will need to order one. If you haven't ordered a copy in the last 12 months, it will be provided at no cost from the credit reporting agencies in Australia. They are Veda Advantage, Dun & Bradstreet, Experian, and TASCOL (if in Tasmania). You may have listings with one or all of these credit reporting agencies. They will take 10 working days to send you a copy of your report. For a fee you can have one sent to you urgently. On your credit file, will be the company the default is with, and an account number. This should correspond with an account you have with them. If it doesn't, or if you don't have any accounts with the company in question, there is a good chance there may be a mistake on your credit file.
2. Gather all your information first, and try and determine how the default made its way to your credit file. Before you call the company in question, sort out what you know about the situation. Have they made a mistake? How have they made it?
3. Write to the Creditor to ask for information on the account. You may need to find out more about how the default got there. Every company keeps a file on its customers and you can write to them and request your account information to date.
4. It is going to be hard going. Most people find it really hard to correct their credit listing themselves -especially if it's complicated. For one, the Credit Provider has to comply with a whole heap of legislation that crosses different codes, and if you don't know legally where they may have made errors - it's pretty hard to persuade them they have done the wrong thing. Secondly, negotiating anything on your own behalf can be tricky - the old foot in the mouth routine can get you into trouble and see you stuck with the listing for the whole term. If you are able to show cause as to why the listing was put on your credit file unlawfully, there is a chance it will actually be removed.
5. You may need an advocate. If you find out you have bad credit, and you have neither the time, skill, nor the patience to investigate and dispute your credit listing, you can consult a credit repairer. They will conduct an audit-like investigation of your case and the circumstances surrounding the credit listing, based on the relevant legislation applicable to your case. And most importantly, they will probably think of things you had never thought of to strengthen your case for the default removal.
Mr Doessel says credit repair is not suitable for everyone, and sometimes if people have 'done the crime', they may need to do the time. He says if you are a serial offender for late payments, or if you are currently struggling to keep your head above water, then new credit- especially major credit - is NOT going to make it all better.
"But if you have been unfairly treated, or there has been a mistake on your credit file, then you have a right to insist on that inconsistent listing to be removed or corrected," he says.
He says avoiding bad credit requires a combination of good repayment habits, good communication with Credit Providers, and regular reviews.
"Every consumer should order a copy of their credit report regularly - at least once a year - to ensure everything reads accurately. It is also important to check your credit report before applying for any major credit - so if there are any inconsistencies they can be addressed prior to the finance application," he says.