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Credit files and credit history

Documents recording your credit activity and your creditworthiness

A credit file (or “credit report”) is a document detailing your credit history (ie. all activities related to credit and debt), generated and maintained by a credit reporting agency (or “credit bureau”). You will have a credit file if you have used or applied for credit within the last seven years. Once listed, court judgments, credit applications and even details of accounts overdue for more than 60 days (even if you have since paid the account) are kept on file for five years. Clearouts (which occur when a debtor is classed as “missing”) and bankruptcies remain on your file for seven years from the date of listing. In addition, bankruptcy information is stored on the National Personal Insolvency Index permanently.

Lenders use credit files to determine whether and how to offer you credit. (Whether a lender checks your credit file does not depend on the size of the loan you are seeking.) Having a good credit history will increase your chances of being approved for a credit card or loan, and may improve the interest rate you are offered.

If you have never used credit, your lack of credit history may make it difficult for you to obtain credit for the first time. This “Catch 22” situation can be overcome by starting small; for example, you could try applying for a credit card with a low credit limit. If you are refused credit in these circumstances, ask why. The reason may not be your lack of credit history. It could be that your income is not enough, or that you have not spent enough time at your current job. Each lender has its own criteria for credit applicants. If you are refused, it’s a good idea to wait for six months before you make another credit application. Each time a lender checks your credit file, an “enquiry” is marked on your file by the credit reporting agency, and it’s not uncommon for some lenders to refuse credit because your file contains too many credit inquiries.

If you have difficulty obtaining your first credit account, you might consider approaching a family member or close friend who has an established credit history and asking them to co-sign your credit application. Then, once you have repaid the debt or demonstrated that you can afford the monthly repayments, have a go at getting credit by yourself. If this option is not available to you, getting a secured credit card may be the solution. This type of credit card is linked to a savings account where the amount of credit offered is equal to the amount of savings. In this way, a secured credit card poses less risk to the creditor since if the debtor defaults they can withdraw the outstanding amount from the linked savings account.

It is your responsibility to make sure that your credit file is accurate, so obtaining a copy of your file and checking it for mistakes before you apply for credit can be a good idea. Errors on credit files can occur for a number of reasons such as stolen or unauthorised use of credit cards, the same name being shared by several individuals or a creditor having provided incorrect credit information.

You can obtain a copy of your credit file by contacting one of the two main credit reporting agencies operating in Australia, Veda Advantage or Dun and Bradstreet. (Both provide a range of credit file extract products, including free partial copies of your credit file which will take some time to be sent to you, and non-free full extracts they will send more promptly or make available via the web.)

If you think there is an error or inaccuracy on your credit report, write to the credit reporting agency from whom you obtained the copy of your file clearly setting out the listings that you dispute, explaining the reasons for your disagreement and requesting deletion, correction or the addition of an explanatory comment. Enclose copies of documents that support your argument. For clarity, you may want to send a copy of your report with the disputed items highlighted.

After contacting the credit reporting agency, if you are not satisfied with the action taken or they are unable to resolve the matter, you are entitled to have your problem handled under the dispute settling procedures set out in the Credit Reporting Code of Conduct issued by the Privacy Commissioner. The Privacy Commissioner has the power to investigate the matter, and if necessary, to order credit providers or credit reporting agencies to change their procedures, amend information or compensate you financially for loss or damage resulting from a credit reporting infringement.

In addition to genuine mistakes, your credit history may be affected by credit fraud. Credit fraud occurs when someone steals a consumer's identity by illegally using their personal details to obtain credit. Credit fraud is a serious crime and could result in you being made personally liable for the debt and bearing the negative consequences of a blemished credit history. If you have obtained a copy of your credit file and believe it indicates that someone has used your identity fraudulently, contact the police immediately to report the fraud, then contact all credit providers concerned to notify them of the situation. Keep records of your contact with the lenders, including dates of conversations, names of staff members and direct contact numbers, and make sure that they keep you informed about what they are doing about the situation. Once the lenders have finalised their investigations, the relevant credit reporting agency will be notified of the outcome, and if credit fraud is proven, all counterfeit listings will be deleted from your credit file. 

Some additional information about this subject is available on the Australian Securities and Investments Commission's Your Credit Report web page.