What it takes to keep your credit file in good standing
Maintaining a good credit file is much like preventative medicine for your health. If you take good care of it and have regular checkups you can find and address any problems as they appear. Your credit file needs to be checked and maintained on a regular basis in order to keep it healthy. You want to ensure a long and prosperous financial future for yourself and maintenance is the most effective way to get this done.
Why you need to avoid a bad rating on your credit
All the credit that you apply for in the future will be based on a credit report that your lenders will request about your credit file. If you have bad credit you will not be considered for any major loans that you may need in the future.
On a personal level, you may never own the home of your dreams if you have bad credit. You will not be approved for any type of car loan or credit cards. Bad credit will follow you wherever you go until it is fixed, and it is much harder to get it repaired than to maintain it along the way. This is a trap that many fall into.
On a business level bad credit may stop you from getting a business loan. Businesses that are small to mid-sized count on these kinds of loans to grow their companies. Expanding your business will be just that more difficult if you can’t get any kind of business loan. This also includes financing for office furniture, credit plans for a mobile phone, business credit cards and setting up supplier accounts. Your business will be limited to cash only while you are operating under an umbrella of bad credit.
How to find out if you have bad credit
Finding out if you have a good credit file or a bad one will follow the same procedure. You can email or write to the three different major agencies for credit reporting in Australia to make a written request for a copy of your credit file. The major agencies you can contact are Veda Advantage, Tasmanian Collection Service, and Dun and Bradstreet, Veda Advantage has over 14 million credit files for Australians and are major player in the credit reporting field.
It will take approximately 10 business days to receive your information from the date of application. It is definitely worth all the time and effort taken to discover what is contained in your file. Not too many people realise that they have a default appearing in their credit history, and it can remain on the file for up to five years.
If you have paid a bill more than 60 days in arrears there is a good chance that it has been reported to the credit agency. This includes bills for mobile phones and utilities. Even paying the bill off does not mean that the record has been erased.
Defining a bad rating
A bad history of credit would include any notices of bankruptcy, credit defaults or court writs or actions that appear on your file. If you have made too many applications or credit inquiries, or even have basic defaults on your file, lenders may consider you a high risk and deny any future credit applications until your credit is fixed.
Maintaining a good credit file before it goes bad
You can see how damaging a bad credit rating can be. It can determine many of your future decisions both personally and with your business. If you request a report from one of the credit agencies listed above and see that your credit file is in good standing, you only have to maintain it and check it from this point on.
Here are some of the actions you need to take to keep your credit file in good condition.
1. Get alerted about your credit regularly
You can sign up for an alert system with Veda Advantage. It only costs $79.95 yearly and you will be mailed a copy of your report. If there are any credit file changes made during these 12 months they will email you directly. Any discrepancies you see on the file can then be worked out immediately so that your file does not get tarnished in any way. If you are not interested in signing up for this alert system then you should at least get a copy of your file once every 12 months to make sure that it is always kept in good condition.
Observe the limits on your credit card
Whether you use your credit card for business use or personal use, you need to keep track of the credit limit and make sure that you never spend more than the limit allows. Set a budget for spending and follow it carefully.
Also, some lenders will reject loan applications if you have made a credit inquiry more than twice in a month or if you have inquired about your credit more than six times in a year. Find out what your credit history looks like before submitting an application for a loan or credit card so that you have more chance of being approved and do not have to submit additional inquiries.
Try to keep the credit limit on your credit cards at a reasonable rate that matches your budget. Having a high credit limit is a temptation to overspend.
Handle bounced checks
If you have a business and have received bounced checks from your customers your business will suffer and you may not be able to meet your other financial obligations. Chase up these accounts and let these customers know that non-payments can be reported to the credit agencies which will be a black mark on their file. This can be done tactfully, but effectively. You should also run a credit check on any clients that would like to set up a large account with your business.
Pay on time
This is the easiest way to keep a good credit file. Sometimes you will need to organise things differently on a business and personal level as you take on more credit. You will need to devise an easy-to-follow system that makes sure that all of your bills and payments are made on time every month. If you have employees that are in charge of making the payments for your company, it is a good idea to check in from time to time and monitor the process. You will still be responsible for any late payments, even if it is an employee that overlooks one simple payment.
How to repair your credit
If you have received a report and it is not looking good there a few things you can do to get it repaired.
1. If there are any errors on your report it is within your rights to have them fixed. If you see credit applications and defaults that aren’t recognizable you should take a further look into them in case there has been identity fraud on your account. The police may need to be notified if there is any suspicion of fraud.
Overdue bills should not be reported until they are least overdue by at least 60 days. If you see any overdue bills that have been added unfairly, they can be corrected. New legislation may be put into place in January 2011 that allows creditors to report overdue bills if they are only one day late, so be sure to keep an eye on this legislation to see if it goes into effect.
2. Make sure that you are told in writing about an intention from a creditor to list the defaults on your credit file. If you are not told in writing, you can get this repaired on your file.
3. Hire a professional to work with you on credit repair. They are experienced in working with the credit agencies and know the current legislation involved. Many people have tried to fix their own credit report with poor results. It is worth the small extra cost to make sure that the job is done right the first time. You do have the right, however, to contact the agencies yourself to try to get the situation rectified.
A good credit file is a lifeline for your financial situation both now and in the future. It deserves all the attention that you can give it so that it remains strong for many years to come.