Credit Ratings: What is ‘Bad Credit’ and ‘Good Credit’?
Posted July 30th, 2009
and last modified March 10th, 2010One of the most frequently asked questions we receive at Credit Card Finder are those about credit ratings, particularly the affects and influence of having ‘bad credit’.
Whenever you make a financial move, whether it be an enquiry, application, repayment, or file for bankruptcy, it is being recorded in your own personal credit file. In Australia, this credit file is organised by Veda.
What is my credit history used for?
When you make an application for finance, including credit cards, personal loans and mortgages, the financial lender or bank you’ve applied with has the right to see your credit file.
By viewing your financial history, it gives them an impression of how trustworthy and reliable you truly are, or whether you’re too risky to lend to.
Does my credit file have my ‘credit rating’ on it?
Contrary to popular belief, your credit file in Australia does not give a solid figure for your ‘credit rating’ or ‘credit score’. However, banks have their own way of judging your credit-worthiness, which often involves assigning a credit score of their own when assessing new applicants.
What is in my credit file?
Your credit report from Veda features :
- Personal details: Including your name, gender, your history of residence/current residence, drivers license details, date of birth
- Credit applications: The type and amount of credit you’ve applied for along with any enquiries you have made in the previous five years.
- Credit accounts: Any financial accounts which are current and open.
- Credit Defaults: Any overdue or late account action may have been listed against your credit report.
- Bankruptcy: Whether or not you have ever filed for bankruptcy.
- Judgments: Your financial decisions and other general public record information.
Why was my application for credit is rejected?
This is due to the financial lender you applied with believing you would not be a suitable borrower for whatever reason, as you pose too much of a liability risk to them or do not meet the financial requirements necessary for their product.
This could be due to a number of reasons, including but not limited to:
- Having overdue accounts and defaults on your credit accounts.
- Incorrect information recorded on your credit report.
- Fraudulent use of your credit card resulting in defaults.
How long are defaults and personal details kept on my personal file?
What happens if I have ‘Bad credit’
If you have a generally negative credit file with plenty of defaults and overdue accounts, banks will be less inclined to lend to you as you pose more of a risk to them.
You may be rejected from your applications for credit, or have to at least compromise with a higher interest rate (to compensate for the ‘higher risk’ of the bank lending to someone who is more prone to credit defaults).
During the 5-7 years you’ll have to wait for your black marks to be erased, treating the credit you own responsibly will improve your file.
What happens if I have ‘Good credit’
If you have been responsible on your credit repayments and acted responsibly with your credit, you should have a strong credit standing. This will open you up to easier approval for financial products and put you in a position to negotiate lower interest rates with your banks.
Is the current economic situation affecting credit applications?
The current state of the economy is causing banks to become stricter on credit approval criteria, as they can not afford to take on bad debt.
What does a credit rating report look like?
Veda have posted an example credit file which can be viewed here: http://www.mycreditfile.com.au/doc_library/sample_report/sample-credit-report-06.pdf
Where can I view my credit file? Does it cost to view my credit file?
Yes. It costs $29.95 and you can order a copy from Veda here.
Where can I find out more information about my credit file and history?
This page features a summary of the key points regarding Australian credit files. For more information, visit Veda’s Frequently Asked Questions.
What are my options for credit cards if I have bad credit?
Approval for credit card application is easy if you have little/no credit file let alone a good credit file. Unfortunately in Australia credit card approval for bad credit applicants is tough, particularly during the economic downturn.
My financial position is quite poor. I don’t think I could meet the requirements for any credit card.
Are you finding your debts hard to handle and finding it harder to find a good debt consolidation program?
Fox Symes have been featured on Today Tonight and A Current Affair. A free, short phone call is all it takes for you to find out if they can help you too.
- Credit Card Application Tips – Tips to help you successfully apply for a new credit card or financial product.
- Credit Rating, Credit Limit and Credit Repair Guide – Find out more information and related articles about your credit.
Related posts:
- Managing your Credit Rating
- Credit Options If You Have A Bad Credit Rating
- What Is My Credit Score And How Can I Obtain My Credit Report?
- Credit Rating Score explained
- Understanding your Credit File
- How To Fix A Bad Credit Record and Improve your Credit Score
- Credit Reports: How Do Credit Reports Work?
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