“to err is human; to forgive, divine”: Protecting your credit file, more important than ever.

What do you know about your credit file? Do you know what credit providers you currently have?

You probably haven’t heard of theNational Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018″  but from the 1st of July 2018, paying your bills to credit providers on time will be recorded on your consumer credit file.

Equifax The consumer credit information section includes:

  • Details of credit enquiries that have been made on you when you have made an application for consumer credit. Consumer credit relates to loans for household or family purposes as well as for the purchase, renovation or re-financing of a residential investment property. Obvious types of credit include credit cards and loans like mortgages, personal and car loans as well as credit contracts such as telephone, electricity, gas and internet. Other forms of credit include interest free store finance and store cards.
  • Consumer credit liability accounts – this is an account that you currently have open or may have had in the past. It includes the type of account, the open and/or close date as well as the credit limit.
  • Monthly repayment history on credit accounts such as mortgages and credit cards. This reflects whether you have paid the minimum amount required on time each month or not. Please note that not all credit providers supply repayment history information to credit reporting bodies like Equifax
  • Overdue accounts such as defaults and serious credit infringements
  • Public record information like:
    • Court judgements
    • Directorship details
    • Proprietorship details
    • Bankruptcy, debt agreement and personal insolvency

Commercial credit information

  • Details of credit inquiries that have been made on your for commercial credit. Examples of commercial credit include a mobile phone contract or credit card for business use or a business loan.
  • Details of any overdue commercial credit accounts and other debts.”

Currently, it is stated only the timeliness of mortgages credit card repayment information will be recorded, however it appears this is due to the technical capabilities of other credit providers. Additionally, other organisations such as the ATO are keen to use this mechanism as tool to collect on debts.

Why does this matter?

Simply, your ability to access credit and at what interest rate you will pay.

Alexander Pope’s Essay on Criticism states “To err is human, to forgive divine” and the first part of this quote certainly rings true of all of us and in our increasingly automated and digital world the risk of error (late payment, incorrect billing etc) has increased. As for the forgiveness, there is no divinity in debt and naturally a credit provider will raise interest rates when they see increased risk.

So although, on the surface it appears to reward good payment behaviors failing to live up to these behaviors will have serious consequences on your standard of living. Typically, this will happen when you need support the most, for example an extended period of unemployment or illness or injury to you or a loved one.

Here are some suggestions to assist:

  • Don’t let debt (bills) get out of hand.
  • Take action immediately, don’t let it get to credit reporting stage.
  • Create a personal budget and review it every month.
  • Know exactly what your credit terms are, and who provides it.
  • Know exactly when all payments are due and what their terms are.
  • Sign up to a monthly credit reporting agency and check your file. Question any organisation that has accessed your file immediately.
  • Ensure all your private information is safe and secure.
  • Keep a list of all your providers, and have a plan to notify of change of billing when required.
  • Think about a savings plan for emergencies. Like all emergencies, Are you prepared? What do you do? Where do you go?
  • Ensure your income protection is updated so that it is still relevant, timely and will cover what is needed.
  • Do your homework and if necessary seek financial advice before applying for credit.
  • Know your rights, including privacy rights.

If you would like to speak with us further, please contact the office to make an appointment.

General Advice Warning

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on the author’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.