WE ALL like to think we have a good personal reputation but when we apply for a loan, credit card, mobile phone plan or other sources or credit, lenders want to see how our reputation for managing credit stacks up.
It's all part of our personal financial profile, and that makes our credit record worth looking after.
We each have a personal credit history maintained by credit reference agencies such as Experian or Veda. This record is comprised of basic details like our name, age and address, but it also features information lenders use to decide what sort of credit risk we pose including details of loan enquiries made in the past five years plus details of any debts that are 60 days or more overdue. Since March 2014 credit reports may also include details of our monthly repayment history on home loans and credit cards (a good reason to keep repayments up to date).
Not surprisingly, our credit record is one of the key pieces of information lenders look at whenever we apply for credit. Any black marks on this record can see you knocked back for a loan with a mainstream lender.
These days, our credit worthiness can also be summed up by a single credit score, which takes all the factors in our credit record into account. The higher the score, the lower the risk you pose to lenders and the more likely you are to be offered credit at a competitive rate (all other things being equal). This all makes our personal credit score extremely important information.
Many people don't realise it's possible to get a copy of their own credit record and credit score. In fact, research shows around 80 per cent of Australians have never checked their credit score at all. My guess is, most don't know such a thing exists.
But it does, and not only can your credit score directly affect your ability to borrow money - and the rate you're likely to pay, your credit record can also provide an early warning of identity theft.
That's why it is worth taking a look at your credit score - and credit record, at least once or twice a year. There is a range of ways to do this - and it can be at no cost to you.
As a guide, you can apply for a free copy of your credit score from getcreditscore.com.au, or from the most recent provider, creditsavvy.com.au. The Credit Savvy site also features plenty of consumer-friendly information on managing debt as well as practical tips and FAQs.
Dun & Bradstreet's website (www.dnb.com.au) also provides links to obtain a free copy of your credit report.
We all want to get a better deal on finance, and shopping around for a low rate is a sensible step. Making yourself an attractive proposition to lenders by having a good credit track record is equally worthwhile. Getting to know your credit report and credit score can provide a real confidence boost when it comes to negotiating with lenders.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.