How to Ruin Your Credit Rating in Only Fourteen Days
Fourteen short days is all it takes to ruin your credit rating.
Every bill you pay is now being tracked by Australia’s all-seeing, all-knowing credit reporting bodies. So a default on a payment that is only fourteen days late, could potentially stop you from getting a loan, a phone, a rental property, or even putting on the electricity because of the massive shift in the way credit reporting bodies record your payment information according to a leading Australian consumer and financial law firm.
Finance law firm MyCRA Lawyers warned that credit reporting bodies are now recording on people’s credit files, their bill payment histories.
Known as RHI or ‘Repayment History Information’, this records in black and white on your credit file if you pay your bills on time or if you are a slow payer.
“Pay a bill 14 days late like your mortgage, car loan or credit card bill, and it will appear on your credit file. Pretty soon it will also include your phone and power bills,” Mr Doessel from MyCRA Lawyers said.
This is how it will appear on your file, an R means nothing was reported, a 1 means you were between 14 and 29 days late paying, up to a 6 for 6 months. An X means that payment has not been received after more than six months, and you have pretty much blown any chance of getting credit.
“Most companies will forgive some late payment depending on the creditor and the amount so if you are two months paying your phone bill or power bill, you might be okay, but for larger amounts and longer time frames it’s pretty much all over red rover“, Mr Doessel said.
The idea behind the changes was to offer more transparency as to the credit worthiness of individuals and reduce the risk to credit providers.
“The problem is reporting to the credit reporting bodies is inconsistent, we’ve seen cases where someone hasn’t paid their bills for months with nothing on their file and then suddenly it pops up they are way behind and clearly a credit risk. In other cases we’ve had a client miss a bill because they moved house or changed email address and now they can’t even get a mobile phone“, Mr Doessel said.
“You can keep track of what is being recorded on your file by going to Free Credit Rating and checking your file. If you find something untoward on there that will impact you getting a loan we can help get it removed,” Mr Doessel said.
“The other issue is these late payment records are usually just used as a tool for lenders to have an excuse to charge higher interest rates. They get you through the door with a low variable rate then say ‘Oh I’m sorry, you missed paying a bill by 14 days and we will have to charge you an extra percent on home loan. It is essential everyone checks their credit rating once a year at Free Credit Rating to keep track of their financial reputation.” Mr Doessel said