Your Credit History And Its Effect On Credit Score
- An article prepared by Joseph Trimarchi Solicitor, the contents of the article does not constitute financial or legal advice, it has been produced for educational purposes only.
What factors are considered when credit scoring?
Credit scoring takes into consideration (5) factors in producing a score which is acceptable to credit providers. And if acceptable, acts as a precursor to loan approval. Therefore it is important to present a good credit score. Your credit score is in simple terms a series of criteria which lending institutions rely upon. The key factors in credit score are;
- Credit: Your current and past performance is taken into consideration.
- Capacity: Are you able to meet the repayments of a loan as and when they fall due?
- Character: Stability of work and residential address.
- Capital: What assets do you own?
- Outside factors: What factors outside your control affects your ability to pay back the loan?
The first two, Credit & Capacity are direct link to your credit history. The conduct of current loans and credit is reflected on your credit history. Any repayments which are more than (60) days behind are noted on your credit file as a default.
Current lending practices adopted by most lenders since the global financial crisis (GFC) some years ago will see you rejected for finance even if a small blemish appears on your credit file.
Here are some tips to ensure you keep a health credit score.
- Keep all loan repayments on current loans up to date and meet all financial obligations including paying on time utility and phone bills.
- Limit the number of loan applications made.
- Keep liabilities to a minimum as prospective lenders take this into consideration when looking at serviceability.
- Try to present a stable pattern of employment and residential address. The rule of thumb is (3) or more years working and residing at the same place would be sufficient.
- Accumulate assets. Real estate is the preferred type. However, other assets such as share are also considered as positive.
- Try to minimize the impact of external factors. If you know the economy is struggling hold off on applying for credit until things turn around.
- Prior to applying for credit understand the specific requirements of each lending institution. As a broker do not to formally submit an application for finance until it has been assessed for its merits.
- Keep the amount of enquiry “footprints” on your credit file to a minimum. Note caution ients that making an enquiry for finance on the internet may lead to an application being lodged with an institution. Numerous applications may lead to future finance applications being rejected.
Remember if you have a problem with your credit file history, there is something you can do. The team at Joseph Trimarchi & Associates have assisted many Australians restore credit worthiness.
Credit file restoration is the method of challenging defaults & judgments that appear on your credit file. The process is legal and available to all Australians who have an incorrect or disputable listing which appear on their credit file.