Stay on top of your bills for agood credit rating
As at 12 March 2014, the Australian laws for credit reporting (also known as your credit rating) have changed.
This change means you will now be assessed on whether you pay your bills on time (rather than if you have
occasionally paid them late). Now, more than ever, it is important to effectively manage your household finances.
What is credit reporting?
Credit reporting is a rating of your personal
finance history. The report is used by banks,
lenders or service providers to decide
whether or not you are able to pay for
their services reliably and what fees they
should charge to cover their risk, should
you fail to pay. It’s basically how a bank
decides whether to approve or deny your
mortgage or credit card applications.
What has changed?
Previously, in Australia, we have used
‘negative’ reporting – which means the
rating has been based on whether or not
you have been denied credit for home
loans or credit cards in the past.
The problem with this approach is, given
rising house prices, people are applying
to borrow larger amounts and often need
to apply to multiple lenders before being
approved for their loan. Hence, they have
accumulated negative credit points in
the process.
Now, to be in line with the Organization for
Economic Co-operation and Development
(OECD), we have started using ‘positive
reporting’ – which means the rating is
based on whether you have paid your bills
on time. It’s probably a truer representation
of how financially reliable you are, however,
this means that every time you are late
paying a bill, you may affect your credit
rating. And most of us occasionally fail
to pay a bill on time for a multitude
of reasons.
To avoid a bad credit rating, make sure you
pay your bills on time. A few suggestions to
make this easier:
• Set-up scheduled payments or direct
debit to pay your regular bills.
• Receive your bills via email rather
than post – it’s easy to set payment
reminders and create folders to keep
track of your finances.
• Use the calendar in your email or on
your phone to remind yourself when
bills are due.
• Download your bank’s mobile app,
so you can pay bills when you are not
at home.
Reference Gold Financial Planning News Letter Autumn 2013
This may contain general advice. General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.
