As people who have found themselves in need of bad credit mortgages can attest to, your credit report can have a major impact on your ability to obtain home finance.
It’s with this mind that you should take time to understand exactly how your credit report is compiled, as well as ways in which to improve it.
This may have been simpler in the past, but Australia’s move away from so-called “negative” credit to “positive” credit means it’s time to reevaluate how your credit history is composed.
Negative versus positive
Previously, Australian credit reports would focus on negative information, including missed bills, defaults on loans, bankruptcies, insolvencies, judgements and other financial information that would give lenders a picture into your economic history.
However, Australia will soon add a positive credit spin to its reporting system, which means added information relating to your credit history. This includes types of accounts, the dates of when these accounts were opened and closed, details relating to the credit provider, credit limit placed, credit utilisation rate, balance of the account and repayment history.
The hope is that the added information will give lenders a clearer picture into your financial history, and allow them to take specific circumstances into account before making a decision.
Even with a more comprehensive reporting system, at the end of the day, a higher rating is still the goal.
There are a number of strategies you can use to improve your credit, but most come down to common sense.
For instance, by regularly reviewing your credit report, you can search it for any errors or inaccuracies that may need to be changed.
Other smart strategies include using a variety of different credit types, keeping credit accounts open even if they’re not being used, or perhaps even being added to someone else’s credit account if they have a high rating.
However, the best way to improve your rating is by paying down debts in a timely manner.