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When it comes to your credit rating, it's time to think positive! With the introduction of comprehensive reporting over the last couple of years, you can have a credit rating that actually shows your positive creditworthiness to would-be lenders, and not just your shortcomings.

In the past credit agencies only held negative reports on your credit status. For example, they took note if you had any defaults on loan payments and/or the number of applications you made for loans but not whether they were approved.

Under the new regime you are awarded a credit rating score. The maximum score you can achieve is 1200 points, with the national average being 760. Lenders will be able to assess your creditworthiness by your ranking. If, for instance, it is as low as 200, then lenders will know you have a 50 per cent chance of suffering an adverse credit event in the next 12 months.i

A global trend

The move to comprehensive reporting brings Australia into line with other countries around the world.

Your report now will show the open and close dates of any account, the type of credit, your credit limit and your monthly repayment history over a 24-month period.ii

If you have run into trouble with late payments, this will only be recorded on your file if the amount is more than $150 and/or you were more than 60 days overdue. The rating does not apply to telcos or utilities, only credit providers.

The upshot is that you have the opportunity to more readily demonstrate your creditworthiness to potential lenders. The new process will highlight good credit behaviour, allow you to recover faster from adversity and gives those who have not yet built up a credit record the opportunity to do so more swiftly.

How to find your rating

It is easy to find out what your credit rating is. Anybody can seek their credit rating for free once a year by contacting one of the three national credit reporting bodies: Veda (MyCreditFile.com.au); D&B (CheckYourCredit.com.au); or Experian (Experian Credit Services).

You need to supply your full name, address, and date of birth, previous address and driver’s licence number. The reports should be provided within 10 days of receipt of your request.

You can also get a free report if you have applied for and been refused credit in the last 90 days or where a credit provider wants to correct information in your credit report.

How to improve your rating

To have a good credit ranking, make sure that you do not apply for several loans at the one time. While you may do this because you are sounding out the market for the best deal, it is sending out a different message to lenders. They interpret this as you being in financial trouble.

If you have had a black mark recorded against your name at some stage in your life but now are in a good financial place, the new rating will allow you to demonstrate to would-be lenders that you have changed your ways.

Greater competition

With the move to comprehensive credit reporting, it is likely that lenders will start offering lower rates to people with a healthy credit score.

This risk-based lending will prove a bonus for those with solid borrowing records and motivate others to improve their rating.

In addition, the new ratings system will potentially speed up loan applications if you choose to apply online. Lenders who use automated processing will be able to accept or reject your application in minutes rather than in days or weeks.

Comprehensive credit reporting can only be seen as a positive – for both borrowers and lenders alike.

www.whistleout.com.au/HomeLoans/Guides/  Credit-Scores-in-Australia-How-They-Work

ii  www.oaic.gov.au/privacy/privacy-resources/ privacy-  business-resources/privacy-business-resource-3-  credit-reporting-what-has-changed#s10

iii www.veda.com.au/yourcreditandidentity/   comprehensive-credit-reporting

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The information contained within the website is of a general nature only. Whilst every care has been taken to ensure the accuracy of the material, Connolly Wealth Management will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.

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