Before applying for any type of credit card or loan it’s very important to know about your credit report score or credit rating. All finance providers, including banks, finance companies and even electricity and telecommunications companies will perform a credit check on you before they approve a loan facility or open an account with them. There are certain things you need to be aware of that can affect your eligibility and success to secure the loan.
Here is the list of things you should check before applying for any type of loan:
(1) Did you default on any payment higher than $100 for more than 30 days?
If so, it will be on your credit report and most likely you will be denied the loan. You can still approach prospective lender, tell them about you mishap upfront, explain it and hopefully, if you provided reasonable explanation of what happened, they can be considerate. Payment defaults are kept in your credit file for 5 years. Bankruptcies are kept for 7 years.
(2) Have any of your previous creditors referred your account to solicitor or credit agency?
Again, this type of negative information will be recorded in your file and may stop you from getting credit approved. If you had good reasons not to pay or the payment is in dispute, discuss it with the lender beforehand, rather that they discovering it first.
(3) Unpaid traffic ticketsand fines
You may have noticed recent campaign on TV about unpaid fines. If you ignored to pay your speeding ticket and the matter got too far then it will show up on your credit report. There is also an option that you could have moved and haven’t updated your address with transport agency (NZTA), so the ticked never reached you. Advice here is: Before applying for credit check with the Police that there are no unpaid tickets in your name.
(4) Number of recent enquiries into your credit file
Most lenders look not only at the amount of credit you already have or any negative information sitting in your credit file. Many will also look at how active you were recently, usually within the last 6 months. If they see too many inquiries, they may be hesitant to approve your application, offer lower amount or higher interest rate. It is not advisable to apply for many loans in short period of time as it will raise the lender’s eyebrows and leave them wondering if you are not in a dare financial situation.
Other reasons for having too many inquiries into your credit file are when people move house or immigrate to the county. At such times you usually sign up with electricity providers, hire a new rental house, open a phone account and so on. All these companies will usually perform a credit check on you. Lenders may not be looking into details about who did the enquiry. For most of them each enquiry is equal. So be aware of this when you applying for loan at such times.
(5) Positive information in your credit file
From 1st April 2012 there are new rules coming for Credit Reporting. In the past your credit report was showing only credit enquiries or negative information. From 1st April 2012 the credit files will also include positive information about you paying your other loan repayments and bills on time, number of loans you have, loan balances, etc.
This can both help and hurt your chances to get loan approved. In most cases if you meet all your obligations regularly then it I will have a positive effect.
If you have too many loans then now you won’t be able to “conveniently” omit some (btw. that’s illegal and can lead to prosecution if they found out). In this scenario the new credit reporting will be less favourable to you.
You can get a copy of your Credit Report for free from credit agencies like Veda Advantage and Dun and Bradstreet, but will have to wait up to 20 working days (1 month). Alternatively you use their paid service and get the report quickly, usually within 1-2 workings days.