Understanding Credit Reports and Credit Scores
Your credit report is a record of your credit history – it shows how well you’ve managed loans, credit cards, and other bills. Lenders use it to help decide whether to give you credit and on what terms.
Your credit score is a number based on the information in your credit report. The higher the score, the better you may look to a lender.
Credit reports can be confusing – especially if you’ve been through a tough time financially. Here are the basics you need to know.
What’s in your credit report?
Your credit report includes:
- Personal details – your name, date of birth, address, employer, driver licence number (if you have one).
- Credit accounts – the type of debt (e.g. credit card, personal loan, car loan, home loan), the credit limit, and the types of payments you are making (e.g. principle-and-interest or interest-only payments)
- Repayment history – whether you’ve made payments on time (there is a 14-day grace period)
- Financial hardship – if your lender has put in place a hardship arrangement
- Defaults – any debts overdue by more than 60 days and over $150
- Credit applications – anytime you’ve applied for credit in the past 5 years
- Bankruptcies or court judgments – if applicable.
Utility and telco accounts (electricity, gas, phone, internet) are not listed on your credit report unless there is a default.
Some Buy Now Pay Later providers list repayment history information.
Only licensed lenders (e.g., banks and finance organisations) are able to view repayment history information and financial hardship information. Utility and telco companies cannot see either of these.
What affects your credit score?
Your score is affected by things like:
- How often you apply for credit
- Whether you’ve paid your loans on time
- If you’ve had defaults, entered into a debt agreement, been bankrupt or there has been a serious credit infringement (fraud)
- How long you’ve had credit accounts
How long do things stay on your report?
- Repayment history information – 2 years
- Defaults – 5 years
- Hardship information – 12 months after the arrangement ends
- Debt agreements – 5 years
- Bankruptcy – 5 years (or longer in some cases)
What if I’m in a hardship arrangement?
A hardship arrangement is an agreement with your lender to change your loan repayments due to financial difficulty.
Financial hardship information is recorded on your credit report. However, by law, it cannot be used to calculate your credit score (although a lender might consider the existence of the hardship arrangement when assessing a new credit application).
Being in a financial hardship arrangement shows that a person is taking responsible steps to manage their finances.
Who can access my credit report?
Your credit report could be requested if you:
- apply for a loan from a bank, credit union or finance company
- apply for a store card (e.g. when you buy a TV on interest free finance)
- rent things like a TV, fridge or computer
- apply for a car loan
- buy a mobile phone on a mobile plan. But your credit report won’t be requested if you’re on a prepaid plan
- sign up for a phone (home, mobile or internet) or utility (water, gas or electricity) account
Real estate agents are not allowed to access the credit reporting system (although they may ask potential tenants to obtain their own credit report and give it to them).
Can I fix errors in my credit report?
Yes. You have the right to:
- Get a free copy of your credit report every 3 months
- Dispute any errors – like incorrect defaults or outdated information
Some companies offer to “fix” your credit report for a fee (often quite a high fee). Please be wary about using them. If the information on your credit report is correct, e.g. you were actually in default, these companies won’t be able to fix your credit report.
If the information is incorrect, you can contact the credit reporting body and fix it yourself.
Where can I get my free credit report?
There are two different credit reporting bodies. You can get a free copy from each of them at these links:
You have the right to get a free copy of your credit report every 3 months (or if you’ve been declined credit in the last 90 days or had an item corrected on your credit report).
What impact will there be on my credit report?
Entering into an arrangement with Way Forward may be noted on your credit report.
Different creditors record the information in different ways: some creditors will close your account while others record it as a hardship arrangement (however, this cannot be used in calculating your credit score).
The impact of an arrangement with Way Forward will generally be far less serious than default listings or ongoing missed payments, and it shows creditors you are taking responsible steps to repay your debts.
Final thoughts
Your credit report doesn’t define you. If you’ve had money troubles, you’re not alone – and there are ways to recover. At Way Forward, we’re here to help you take back control and move forward.
