How Credit Files Work in Australia

Your credit file is the most important financial document you never see. Every time you apply for a home loan, car finance, or even a mobile phone contract, lenders check this file to decide whether to approve you. If you've been rejected for credit, there's likely something in your credit file that's causing the problem.

Understanding how credit files work in Australia can help you improve your credit score, get better loan terms, and avoid nasty surprises when applying for finance. Let's break down everything you need to know.

What is a Credit File?

A credit file (also called a credit report) is a detailed record of your borrowing and repayment history. It's compiled by credit reporting agencies (also called credit bureaus) and contains information about every credit account you've had, from credit cards and personal loans to defaults and court judgments.

Think of your credit file as your financial report card. Lenders use it to assess how risky it would be to lend you money. A good credit file shows you're reliable with repayments, while a poor credit file suggests you might struggle to pay back a loan.

The Three Credit Reporting Agencies in Australia

In Australia, there are three main credit reporting agencies that collect and store credit information:

Important: Each agency may hold slightly different information about you. That's why some people discover they have defaults or late payments on one credit file but not another. This is why professional credit repair services check all three agencies when assessing your situation.

What Information is Stored in Your Credit File?

Australian credit files contain both positive and negative information. Here's what lenders can see when they look at your file:

Personal Information

Your credit file starts with basic identification details including your full name, date of birth, current and previous addresses, employer details, and driver's licence number. This information helps lenders verify your identity and track your credit history even if you move house or change jobs.

Credit Accounts

Every credit account you've opened is listed, including credit cards, personal loans, home loans, car loans, and lines of credit. The file shows when each account was opened, the credit limit or loan amount, current balance, and whether the account is open or closed.

Repayment History Information (RHI)

Since 2014, Australian credit files include Repayment History Information. This shows whether you've made your payments on time over the past 24 months. Even one late payment can appear on your credit file and impact your credit score.

Defaults and Serious Credit Infringements

If you're more than 60 days overdue on payments over $150, the creditor can list a default on your credit file. Defaults are serious negative marks that can prevent you from getting approved for loans for up to 5 years.

Court Judgments and Bankruptcies

Court judgments for unpaid debts appear on your credit file and last for 5 years. Personal bankruptcies remain on your file for 5 years from the date of discharge, while Part IX Debt Agreements (Part 9s) last for 5 years from completion.

Credit Enquiries

Every time you apply for credit, the lender performs a credit check, which creates a credit enquiry on your file. These enquiries remain visible for 5 years and can impact your credit score, especially if you have many enquiries in a short period.

How Long Does Information Stay on Your Credit File?

Different types of information have different timeframes for remaining on your credit file. Understanding these timeframes is crucial for planning your financial recovery:

How Credit Files Affect Loan Approvals

Lenders use your credit file as the primary tool for assessing loan applications. Here's how different elements impact your chances of approval:

Credit Score Impact

Your credit score is calculated based on the information in your credit file. In Australia, credit scores typically range from 0-1,200 (Equifax) or 0-1,000 (Experian and illion). Higher scores indicate lower risk to lenders.

Generally, credit scores are categorized as:

• Excellent (833-1,200): Access to the best rates and terms
• Very Good (726-832): Good access to credit with competitive rates
• Good (622-725): Most loans available, rates may be higher
• Average (510-621): Limited options, higher rates likely
• Below Average (0-509): Very limited options, may need specialist lenders

Lender Risk Assessment

Beyond your credit score, lenders look at specific patterns in your credit file. Multiple recent enquiries might suggest you're desperate for credit, while a history of defaults could indicate payment problems.

How to Check Your Credit File

Under Australian law, you're entitled to receive a free copy of your credit file from each credit reporting agency once every 12 months. You can request your file online, and it's usually available within 1-2 business days.

Free Credit File Requests

Each agency offers free annual credit files through their websites. However, be aware that some agencies try to upsell you to paid monitoring services during the request process.

What to Look For

When reviewing your credit file, check for:

• Incorrect personal information
• Accounts that don't belong to you
• Defaults or late payments that shouldn't be there
• Credit enquiries you didn't authorize
• Information that should have been removed due to age

Correcting Errors in Your Credit File

Credit file errors are more common than you might think. Studies suggest that up to 20% of Australian credit files contain some form of error. If you find incorrect information, you have the right to dispute it.

The Dispute Process

You can dispute errors directly with the credit reporting agency, but the process can be complex and time-consuming. The agency must investigate your dispute within 30 days and provide a written response.

When to Seek Professional Help

If you have multiple defaults, complex disputes, or have been unsuccessful in removing incorrect information yourself, consider getting professional help. Credit repair specialists understand the legal requirements creditors must meet and can often remove negative marks that individuals struggle to dispute themselves.

Tips for Improving Your Credit File

Building a strong credit file takes time, but these strategies can help improve your creditworthiness:

Make All Payments on Time

Payment history is the most important factor in your credit score. Even small late payments can damage your score, so always pay at least the minimum amount by the due date.

Keep Credit Utilization Low

Try to keep your credit card balances below 30% of your credit limit. High utilization suggests you're financially stressed and can lower your credit score.

Limit Credit Applications

Each credit application creates an enquiry on your file. Multiple enquiries in a short period can suggest you're desperate for credit and may lower your score.

Maintain Long-Standing Accounts

The length of your credit history affects your score. Keep older credit cards open (even if you don't use them) to maintain a longer average account age.

Mix Your Credit Types

Having a mix of credit types (credit cards, loans, etc.) can positively impact your score, but only if you manage them all responsibly.