January 10, 2024

Creditworthiness, Credit Files, Credit Scores and Credit Reports in Australia – FAQ

Creditworthiness, Credit Files, Credit Scores and Credit Reports in Australia – FAQ

This article will discuss the most frequently asked questions about creditworthiness, credit files, credit scores, and credit reports in Australia. If you couldn't find your answer here, our experts in Credit Counsellors are here to help you find what you are looking for.

9 Most FAQs about Creditworthiness, Credit Files, Credit Scores and Credit Reports in Australia

1. Credit Rating Australia: What is creditworthiness and why is it important?

Simply put, creditworthiness is another way of saying you are eligible for credit. It is the determination that a lender makes based on your history of paying back borrowed money, and your capacity to repay a future debt. A creditworthy person can be trusted to borrow money, and reliably pay it back on time, often with interest. 

2. Creditworthiness Meaning: If I am not creditworthy, then what am I?

There are several different terms to describe the state of not being creditworthy, and you may have heard them before. Such terms include having bad credit, a black mark on your credit file, being blacklisted or credit reported or receiving a court order or default judgment.

Please note, if you are late on a bill, are experiencing hardship, have received a letter of demand, or if you have been summonsed or served with legal documentation, this may not necessarily mean you have a default… yet!

Whether you have been determined as un-creditworthy depends on the type of debt you owe, how long your debt has been outstanding, and the stage of debt collection your account has reached.

You will likely be deemed uncreditworthy if a court default judgment has been ordered against your name, and enforcement proceedings have commenced (such as a warrant or writ being issued for a bailiff or sheriff to attend your property, if you have been served with an examination hearing or exam summons to appear at court and provide your financial information for assessment, or you have received a notice of garnishee of your wages or from your bank account). 

3. Credit Score Problems: What are the ramifications of being deemed un-creditworthy?

Of course, you can survive without having to obtain credit. In fact, some people even prefer to save up and pay cash rather than getting a loan! However, for big expenses such as buying a new car or getting a mortgage, most people will probably need to obtain finance.

Other downsides of a bad credit rating include being subject to higher insurance premiums and higher interest rates for loans and credit cards if you do manage to get approval (as you are deemed a higher risk), you may have difficulty obtaining approval for rental properties and phone contracts, you may be required to pay a bond or security deposit on utilities such as electricity, telephone, internet and cable television, and you might even have trouble starting your own business or practising in certain professions. 

4. Credit Score Assistance: How does a lender know if I am creditworthy?

In Australia, Credit Reporting Bureaus are legally allowed to collect certain kinds of personal information from lenders (such as banks, credit unions, store credit providers), utility companies (such as account defaults and credit advances on water, electricity and telephone bills), and the public record (from ASIC (directorship and proprietorship details) and the Judicial System (court judgments)). This information is then used to calculate a “Credit Score” for each individual, to determine their creditworthiness at a given point in time.

Other factors that can be used to determine credit scores include current repayment history, adverse events, personal information (such as your name and any aliases, date of birth, address history, driver’s license number and employment history), how long the credit file has existed, whether there have been many recent credit enquiries (which can indicate that a person is in financial distress), the type of credit providers that have been applied with (given differing risk levels, for example between a bank and a buy-now-pay-later provider), the type of credit applied for (given differing risk levels, for example between a mortgage and a credit card) and the credit limit or size of loan applied for.

Over time, this information is collated into a Credit Report, which shows a person’s detailed credit history. Please note that different lenders and credit reporting bodies have varying methods of determining creditworthiness, based on their own information and algorithms. 

5. Credit Score Factors: What factors are NOT used to determine creditworthiness?

Under the Privacy Act, Credit Reporting Agencies are subject to strict guidelines and are only permitted to use certain types of information to calculate credit scores. The following factors are NOT used: race/religion, gender, dependents, superannuation, savings, salary, houses, cars and jewellery. 

6. Credit File Information: How long does credit information stay on my credit file?

2 Years – Repayment history information will generally be listed on your credit file for as long as the account is open, and then for up to two (2) years after the account has been closed. 

5 Years – Credit enquiries are recorded for a period of 5 years. Payment defaults may be recorded on your credit file for 5 years if a payment of $150 or more becomes overdue past 60 days. Settling overdue payments won’t remove a credit file default, however, the default should be updated to reflect that the debt has been paid. Court judgments, writs and summonses also remain on the credit file for five years.

7 Years – Serious credit infringements such as fraudulent activity, or where no contact has been made and no forwarding address has been provided despite attempts by a creditor to get in touch after 6 months.

Variable – The length of time that a bankruptcy, debt agreement and personal insolvency will remain on a credit file could vary depending upon when it was lodged, and when it ends. 

7. Credit File Fix: How do I get my credit file updated, get information removed, or what if there is an error?

If a default listing is incorrect (such as that the debt is statute-barred, as a result of a bank error, or due to unavoidable circumstances and you have since entered a new arrangement with your creditor), you may lodge a credit score fix complaint with the relevant Credit Reporting Agency to have the issue investigated and the listing removed.

In some instances with a default judgment, you may be able to request credit file help from your legal representative or from the court in which the judgment was entered, a Notice of Discontinuance to mark the debt as “Paid”, and/or a Consent Order to Set Aside Judgment, which may remove the default entirely.

8. Enhance Your Credit: How can I improve my credit score?

There are a number of ways you can improve your overall credit score with a credit reporting agency:

  1. Start by paying off your debts, closing out your credit cards or refinancing/consolidating your debts into a more manageable repayment arrangement.
  2. Make sure to pay your mortgage, personal loans, credit cards, telephone and utility bills in full as soon as they fall due.
  3. Only apply for credit when you absolutely need to – shopping around for credit and making multiple applications over a small amount of time will not look good!

9. Credit File Help: How do I get a copy of my Credit File?

The four main Credit Reporting Agencies in Australia are:

  1. Equifax (formerly known as Veda Advantage)
  2. Experian
  3. Illion
  4. Dun & Bradstreet

Different lenders use different credit reporting agencies and methods for determining creditworthiness. For credit score assistance, you will need to get in touch with the credit reporting agency directly to obtain a copy of your credit file.

I have tried negotiating with my creditors, my debts are racking up, and my credit file is destroyed. What can I do? 

If you are unsure of your options in relation to unmanageable debt, it is best to seek the advice of a professional. If you are ready to take that step, our friendly Credit Counsellors are here to help guide you through your options, to get you back on track to a debt-free life! Call us today on 1300 003 328, for a confidential, obligation-free consultation. 

Recent Articles