What is a Credit Check and when are they Conducted?

If you have applied for interest free loans, credit cards or a home loan, chances are you’ll know what a credit check is and what it involves. Even if you have undergone a credit check in the past, it is a good idea to familiarise yourself with the process, so you can understand what is involved and do what you can to improve your credit situation.

A credit check is a process a prospective lender will take in assessing you for loan suitability. Obviously if a lender is going to lend you money, they will need to take a close look at where you stand financially. Questions relating to your payment history will need to be answered for the lender to make a decision.

You will be subject to a credit check if you are applying for any sort of finance – from a personal loan or pay by the month insurance through to a store interest-free deal or mobile phone contract. You more than likely will be subject to two credit checks, as prospective lenders will compare credit records from different sources.

What Credit Information is Accessed?

When a credit check is conducted, prospective lenders will information from a credit reporting bureau or agency. Information contained in the report includes your name, date of birth, social security number, residential addresses (your current and past ones), employment history, employer details, current income, and your payment history for your debts and loans for the past 24 months.

Negative things a Credit Check may Reveal

The main negative aspect a credit check will reveal is a tendency for non-payment or late payment of any loans or debts. If it is shown that you don’t have a good history when it comes to paying your debts, you may have your application for finance rejected. If the application is rejected, you may be offered a loan for an amount less than the amount you applied for.

Can I obtain a copy of my Credit File?

Absolutely! Under the Fair Credit Reporting Act 2003, any person may obtain a free copy of their credit check once each year from a recognised credit reporting bureau. The top credit bureaus in Australia are Experian and Equifax. If you have been rejected for finance, you can request a copy of your credit check, prove your situation and request your report. You can also purchase your report for your own records. By keeping a track of your credit, you can ensure you maintain good credit and benefit from it.