Why your credit rating matters

The heartbeat of your loan app

Every Australian has a credit rating. This three-digit score is calculated by independent credit reporting bodies (CRBs) who use data from every bank and financial institution in the country. It’s the first (and sometimes last) thing that mortgage lenders use when deciding not just whether to offer you finance, but also how much and at what terms.

Having an overdrawn bank account, missing credit card repayments, and even falling behind on your rent can all negatively impact on your credit rating. At the same time, a record of conservative borrowing and scheduled repayments can help to boost your score, even more than simply never taking out finance might.

Your credit rating is what banks and lenders will use to assess you; it only makes sense for you to know it too. Applying for a loan without understanding your personal financial position, as viewed by banks and finance providers, is akin to entering a job interview without knowing your résumé back to front.

How to get your credit rating

Fortunately, obtaining your credit file is simple, free, and an important right that all consumers have. You are able to receive one report every 12 months, in addition to immediately after (within three months) an application for finance is refused.

The three national CRBs are Veda, Dun & Bradstreet, and Experian. Follow the links and be prepared to supply your full name, address (and previous addresses), date of birth and driving licence number.

The CRBs are obligated to get your credit report to you within 10 working days. Some offer faster turnarounds, or more than one report per year, for a fee.

Why get it?

There are several reasons to go to the trouble of getting your credit rating before you embark on a mortgage application. Firstly, mistakes do happen and, worse, identities do get stolen. Obtaining your report allows you to check the information the CRBs are passing on to the banks and correct any errors before they cost you your dream home.

Be in the know

Knowing your rating can help you avoid any surprises during your property search and mortgage application. It will help keep your house and loan searches realistic and affordable, which will make them more likely to be successful. It also means you are less likely to have a loan application turned down, which can itself negatively impact your credit rating.

Healthy finances

While those with a poor credit rating might prefer to keep the report out of both sight and mind, that is a recipe for continued credit denial. There is never a better time to work towards improving your financial wellbeing. Your credit report offers an important measurement for you to track your improvements over time.

Your home is likely to be the largest and longest-lasting purchase you ever make. Even if you resell later, the mortgage you take on will be with you for up to 30 years. Many buyers will spend months, even years, seeking out their dream home, but then rush through the financing element of the purchase. Don’t fall into that trap.

Take your time and make sure you have all the facts and information on your side. That includes accessing your individual credit report. It will add some further time and effort to an already complex and exhausting process, but knowledge is power and the benefits – whether you have a ‘good’ credit score or a ‘poor’ one – are worth it.