How to clean your credit report
Are you looking to clean your credit history? Have you been knocked back on a loan and been left wondering ‘Can I fix my credit rating’? Late payments or other black marks could be hurting your credit score. Here’s how to fix bad credit and clean your credit report.
What is a credit report?
If you’ve ever applied for credit (a credit card or a store card) or a loan (personal loan, mortgage or business loan), there’ll be a credit report with your name on it.
Aside from containing personal information (such as your name, date of birth, address and drivers license number), a credit report contains your credit history.
Your credit history includes:
- The number of times you’ve applied for credit or a loan
- The amount of money you’ve borrowed
- The type of credit you hold or have applied for
- Your repayment history and any defaults.
- In some cases, your credit report may also include public record information, such as court judgements.
What is a credit report and where can you get it from?
Your credit report, also known as your credit file, is a digital record held by a credit reporting body or agency. Every time you apply for credit, open a credit contract or make a repayment, the credit provider reports the event to a credit reporting body. Using that information, the credit reporting body calculates your credit score.
In Australia, we have three credit reporting agencies:
Using the links above, you can request a free copy of your credit report once every 12 months. It’s a good idea to request your credit report from all three agencies, as they may be collecting different data.
How is your credit score calculated?
If you’re wanting to clean your credit report, you first need to understand how it’s assessed.
Your credit score, or credit rating, is calculated by the credit agency taking into account all of the information contained in your credit report. The score indicates your ‘creditworthiness’ to lenders and credit providers. ‘Creditworthiness’ describes how likely you are to repay your debts in the future.
Your credit score is represented as a number between 0 and 1000 or 0 and 1200, depending on the credit rating agency. Your score is then rated into one of five bands: excellent, very good, good, average and below average. The higher your score, the better your credit rating.
According to Equifax:
- Below average (bottom 20%) – An adverse event is more likely to be recorded on a credit file in the next 12 months.
- Average (21% – 40%) – An adverse event is likely to be recorded on a credit file in the next 12 months.
- Good (41% – 60%) – Scores in this category indicate that an adverse event is less likely to be recorded on a credit file in the next 12 months. The odds of no adverse events occurring on your credit file in the next 12 months are better than the average population odds.
- Very Good (61% – 80%) – It is unlikely an adverse event is to be recorded on a credit file in the next 12 months. In other words, the odds of no adverse events occurring on your credit file in the next 12 months are more than two times better than the average population odds.
- Excellent (81% – 100%) – An adverse event is highly unlikely to be recorded on a credit file in the next 12 months. In other words, the odds of no adverse events occurring on your credit file in the next 12 months are more than five times better than the average population odds.
What’s the benefit of having a good credit score and why would you want to clean your credit history? As well as making it easier for you to get approved for credit or loans, you can use it to negotiate a better deal from lenders, such as a lower interest rate.
What is your repayment history?
Your repayment history is made up of data collected by your credit providers. As well as loans and credit cards, it will include a history of your repayments on credit contacts, such as phone, internet and utility bills.
Until 2018, credit information reporting was based on only negative events—missed payments, defaults and other black marks, which made it a lot harder to clean your credit history. Now, credit providers are required to report positive, as well as negative, credit events.
Positive credit reporting is good news for borrowers. For example, a credit report may have a couple of old blemishes on it, however, recent repayment patterns indicate that the borrower’s finances are now under control, making it a lot easier to clean your credit report.
What is a default on your credit report?
A credit provider can report a default on your credit file if the amount you owe is $150 or more. To qualify as a default, the repayment must also be 60 days overdue and the creditor needs to have tried to contact you by phone or in writing. A default stays on your credit report for either five or seven years, depending on the circumstances.
You can only have a default removed from your credit report if it was listed in error. On the upside—thanks to positive credit reporting—when you pay the default, it will appear in your credit file as paid. If you’re looking to clean your credit report, then that is what lenders want to see!
If a default has been listed on your credit file incorrectly, the first step is to alert the creditor and credit reporting body. If they are not able to help, the next step is to lodge a complaint with the Australian Financial Complaints Authority.
Have you asked yourself, ‘Can I fix my credit rating’?
There are plenty of credit repair companies who promise they can clean your credit reports. The reality, however, is that black marks on your credit file can’t be removed if they are genuine.
If there are valid mistakes in your credit report, you can ask the credit reporting agency to fix it for you. The request can be made by yourself, for free. There is generally no need to pay a credit repair service to do this for you.
But what if the bad marks on your credit report are true? The good news is that there are steps you can take to rebuild your bad credit rating and clean your credit history going forward.
For a start, much of the information in your credit report is based on only the last two years. This means that making your future repayments on time is a great way to begin rebuilding your credit rating.
How can you improve your credit score and clean your credit history?
As well as making repayments on time, there are other ways to clean your credit history and improve your credit score. For example, lowering your credit card limits can increase your credit capacity and creditworthiness. Paying the card balance in full each month, or paying more than the monthly minimum, may also help to push up your credit score.
Likewise, paying your rent, mortgage and utility bills on time, and limiting the number of times you apply for credit, can also help clean your credit history.
Can you clean your credit report yourself?
While credit repair companies may claim to be able to clean your credit report for you – and charge you a hefty fee for it – it’s important to remember that true information on your credit report can’t be scrubbed away, except by the passing of time.
The only way to truly clean your credit report is by knuckling down and committing to paying your bills and debts on time. That’s why having a budget is really important.
How can MyBudget help you clean your credit report?
At MyBudget, we can design a free 12-month money plan for you that incorporates all of your bills and expenses. This puts an end to bill stress. Instead, money is set aside for future expenses automatically. There are no surprises. Even birthdays, Christmas and costs like haircuts are taken into account.
And to make sure you stay on track, your bills are paid for you, straight from your budget. No more juggling paperwork, struggling to clean your credit history or needing to worry about due dates. Your finances become ‘set and forget’. Meanwhile, our money coaches do all the heavy lifting for you. If an extra bill or expense pops up, our money coaches help to add it into your budget. This is how you stay on track to a healthier credit score and clean your credit history once and for all.
It also sets you up for success for a future credit card balance transfer, debt consolidation loan, or refinance. We can help with that, too! The majority of MyBudget clients pay off all their unsecured debts in less than three years.
Looking to clean your credit report and improve your financial health? MyBudget can help you pay your bills on time and reduce debt faster.
Ready to find out more? Call 1300 300 922 to book your free budget consultation or enquire online.
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