How to protect your credit rating

If you think that being only a few days late making a payment on a loan doesn’t matter, think again. Even the smallest lapse could potentially affect your credit worthiness.

Most people are aware that a loan default will automatically be recorded on their credit report. However, what many people don’t realise is that under the Australian Privacy Act even late payments made to a credit provider will smudge a previously clean credit history.

Specifically, payments for amounts exceeding $150 which have not been paid within 14 days of the due date can be recorded in a report called Repayment History Information (RHI). Paying only part of the amount owing will also be recorded on your RHI as a missed payment. With regard to credit card repayments, this applies if the minimum payment is not made.

What does this really mean?

If you attempt to obtain credit, for example, a new credit card, car finance, home loan, etc, the credit provider can access your RHI to determine your eligibility.

Credit providers are generally defined as lending institutions, and companies that hire, lease or rent goods. These do not include utility or telecommunications providers.

Another important point is that if a debt collection agency has been engaged to recover money from you, information relating to any action taken can be recorded against you.

Businesses are not exempt

Business operators may be impacted as well. For example, if a business relies on credit to buy stock and a repayment is late more than 14 days, the details may be recorded against the business credit history causing problems for future purchases.

Access to your RHI

When a credit provider accesses your RHI, you should be notified as to what information has been collected and to whom the information will be disclosed.

A copy of your RHI must be made available to you from either your credit provider or a credit reporting agency, upon request. You can obtain one report per year at no cost if you are prepared to wait up to 10 days.

The main credit reporting agencies in Australia are Veda, D&B and Experia.

If you believe your RHI contains incorrect information, you should report this to the relevant credit provider to have it amended. Should you believe your credit report is being inappropriately handled, you are urged to contact the Office of the Australian Information Commissioner by telephoning 1300 363 992 or emailing enquiries@oaic.gov.au.

Sources:

Office of the Australian Information Commissioner website www.oaic.gov.au “Privacy fact sheet 34 – Repayment history information and your credit report”