Find out the most common things that can have a negative influence on your Credit File and your ability to be approved for finance. Most people don’t know about number 5!
1. Defaults
A default is simply an overdue debt or failure on your part to fulfil a financial obligation such as a loan or finance contract. It is usually a debt equal to or more than $150 and is more than 60 days overdue. An example of a payment that can result in a default on your Credit File may be as simple as an outstanding telco or electricity bill. Defaults, whether paid or unpaid can remain on your Credit File for up to a period of five years.
The majority of reputable financiers tend to look unfavourably on defaults because it is an indication that you may have neglected your financial commitments in the past. It is important that if you think you may have any outstanding defaults on your Credit File, that you check your Credit File. If you find you have outstanding defaults, contact the financiers who have listed defaults on your file in order to make payment arrangements.
Credit providers you approach in future for finance will look a lot more favourably on an application for finance if you have shown that you have paid any outstanding defaults on your Credit File.
2. Paying a phone or electricity bill late
Not many people realise that paying bills such as phone or electricity bills late can result in an overdue debt being listed on your credit file when it is over $150 and more than 60 days late.
Make sure that your bills are paid on time to avoid potentially ending up with a default on your credit file. If you are having trouble meeting your financial commitments, speak directly to your credit providers, including your telco and electricity providers to make payment arrangements.
3. Not meeting the minimum payments on a credit card
Information regarding your repayment history, such as if you make your credit card and loan repayments on time, can now be listed on your credit file since 2014. One repayment that was late by a couple of days won’t likely impact your credit file, however, a series of late or missed repayments can be an indication to financiers that you’re struggling to meet your financial commitments and may have a negative impact on your credit file.
4. Payday loans
A payday loan is a loan, usually of a small amount up to $2,000 lent at a high interest rate over a short period of time, generally between one week and one year.
While you may think you’re doing the right thing by your credit file by taking out a loan and successfully paying it back, not all loans are created equally and some payday lender loans can even bring down your credit score.
Why do some credit providers shy away from lending to people with payday loans?
Some reputable financiers tend to avoid lending to people who have recent payday lender activity or enquiries on their credit files. There are various reasons for this, but in the eyes of a financier, if an applicant needs a short term loan of such a small amount, they may be experiencing financial difficulties or cannot manage their money. In which case, it would be irresponsible of them to lend the applicant more money and put them further into debt.
What are the alternatives to taking out a payday loan?
ASIC suggests that if you need money fast, there may be cheaper and more suitable alternatives to payday loans including:
Utilities: If you’re having trouble paying an electricity or water bill, contact your utility provider. Most will have a hardship department who will be able to help you to make a payment arrangement. More information on paying your utility bills
Consider a low income loan: If you’re a low income earner, you may be eligible for a no or low interest loan to help pay for essential household items or other services such as medical treatments. More information on low income loans
Centrelink advance payments: If you’re currently receiving Centrelink benefits, you may be eligible to receive an advance payment on your current benefits. More information on Centrelink advance payments
5. Shopping Around
This point is vitally important and unfortunately not many people know that shopping around for the best finance deal can potentially have a negative impact on your credit file. In some cases, it may even hinder your efforts to be approved for finance.
Every time you apply for credit, the credit provider checks your credit file and a credit enquiry is added to your credit file. This will be the case every time you apply for any loan, mortgage, utility account and even a telco account.
If you have high number of enquiries, especially recent enquiries or within a short period of time, it may affect your ability to secure low rate finance and in some extreme cases, any finance at all. Credit providers tend to shy away from applicants who have a high number of recent enquiries.
How to shop around without shopping around
In this day and age, shopping around is very important to make sure you’re getting the best deal and finance shouldn’t be an exception. Rather than submitting your application to multiple financiers and potentially harming your chances of obtaining a low rate finance approval, speak to a good finance broker.
A good finance consultant will have accreditations with many reputable financiers and will have an intimate knowledge of each of their specific lending criteria. Loans For U has accreditations and established relationships with over 40 of Australia’s most trusted financiers and each of our knowledgeable finance consultants have in excess of 10 years in the finance industry.
We can save you time & money on your finance by comparing financiers on your behalf based on your individual profile and finance requirements. Your consultant will only submit your finance application to a financier if we know you fit within their criteria and who we know will give you the best finance options. This means that we do all the hard work for you by comparing the options and you get a guaranteed low rate finance approval and don’t have to worry about potentially damaging your credit file with numerous enquiries.
If you’re serious about protecting your credit file but want the best possible finance options to suit your needs, then speak to one of our friendly finance consultants today on 1800 538 287 or get your instant online quote today.
