A strong credit report can help get you where you want to be

Thinking of taking out a loan to buy a new car, take a round-the-world trip, pay for a wedding, finance a big project, or even just apply for a new credit card?

Well, one important thing to remember, is that your credit report can make a big difference in how well your application goes. But before we go any further, you may be asking...

What is a credit report? 

In Australia, around 80% of us have some sort of credit, but almost half of us have never checked our credit report – and could be missing important information.

Now, if you’ve ever applied for a credit card or loan, or even just signed up with a utility company or telco, then it’s highly likely you’ll have a credit report, with one (or all three) of the country’s credit reporting bodies. These reports provide a picture of who you are, what other credit you have, if you have every defaulted on your payments and, importantly, your accounts repayment history that shows how well you have kept up with payments on your current credit card, home loan, personal loan or car loan over the past 24 months.

Who uses a credit report and when? 

When you apply for credit, such as a credit card or loan, lenders will look at your existing debts, and your repayment history to determine whether you're a good candidate for borrowing money or holding a credit card. The better your credit report, the better you look in the eyes of future lenders.

How does it affect a credit application?

A strong credit report suggests to a lender that you’re responsible with your money, and therefore you’d probably make a reliable customer. And if you’re looking to borrow for a car, a wedding, a house or even just a holiday, this can bring big benefits, such as:

• Better interest rates. With a strong credit report, lenders may offer you lower interest rates, saving you money over the life of your loan.
• Greater borrowing options. You may also be offered more borrowing options, including different types of credit, such as credit cards, personal loans, or car loans.
• Improved credit score. Repayment history influences your credit score, so if you have a history of on-time repayments, your score will likely be higher than your mates who’ve missed payments or defaulted on loans.

Can I access my own credit report? 

Yes. In fact, it’s important that you do check your credit report, for a number of reasons:

• You’ll get a clear picture of what lenders can see when going over your credit applications, and can show you if there are any areas to address.
• It can alert you to any errors on your report that could be hurting your credit score and overall credit health.  
• It can also help you spot any suspected identity theft and other fraudulent activity early on.

You can get a free copy of your credit report once every three months (or up to 90 days after being refused credit) from Australia’s three credit reporting agencies:

• Illion
• Experian
• Equifax

Top tips for improving your credit report

Not everyone’s credit history is perfect, but there are a few ways to work towards improving the health of your credit report.

1. Pay all your bills (including credit card minimums) on time. Late payments can have a negative impact on your credit report, so it's important to always make payments on time.
2. Keep your credit card balances low. High outstanding balances on your credit card can be seen as a negative by potential lenders, as it suggests you may already be spending more than you can afford.
3. Cut back on any unnecessary credit use. Take stock of what credit products you have, and whether you really need them.
4. Check your credit report regularly. This allows you to spot errors or fraudulent activity that could be impacting your credit report. It’s also a great way to make sure you’re on top of all the credit accounts you have open – especially ones you may have forgotten about.
5. Be smart with Buy Now Pay Later. One of the golden rules of good credit health is to only use credit you can afford to pay off. This applies to BNPL products too, so make sure you have enough money to cover all your financial commitments, including BNPL repayments.