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What is a Credit Report and why is it important?

Your credit report plays a crucial role in how lenders evaluate your financial position. These reports are essential for obtaining various forms of credit, including common ones like home loans, vehicle finance, personal loans, credit cards, and Buy Now Pay Later services.

Your credit report significantly influences your ability to access finance and even the cost associated with it. It encapsulates your financial history, including:

  • How frequently you apply for credit.
  • The types of credit you seek, such as home loans, personal loans, or payday loans.
  • Your repayment habits, including punctuality and any account overdrafts.
  • Any defaults, collections, judgments, or court rulings.

It’s a common misconception that only your credit score matters. While your score is important, credit assessment teams also consider the contents of your credit report when deciding on your finance application.

Your credit score provides a quick snapshot of your creditworthiness, but Comprehensive Credit Reporting has a significant impact too. Previously, credit reports primarily highlighted negative credit behaviours, like defaults and bankruptcies. Now, they also encompass positive information, such as your monthly repayment history.

Managing your debt responsibly, making on-time full repayments, can boost your credit score. Conversely, overdue or missed payments can harm your score, as they appear in your credit report. Timely repayments are crucial.

Here’s how credit scores typically translate:

A credit score of 800 or higher indicates a strong position.

Scores between 600 and 800 still allow for finance, but options may be more limited, possibly requiring an explanation for the lower score.

Scores below 600 might lead to specialty lenders’ assistance, but loan terms may be less favorable.

In Australia, three credit reporting agencies—Equifax, Illion, and Experian—exist. Scores and reports should generally align, but occasional differences occur. Home loan lenders predominantly use Equifax.

Before seeking finance, consulting a mortgage broker is advisable. At EquityVision we understand what lenders look for and which ones are likely to approve your application. 

We can even obtain a free credit report on your behalf and evaluate it before advising on your loan application. 

Free personal credit reports are also available from all three agencies in Australia.

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