What determines bad credit  History?
Bad credit occurs when a company places a default on your personal credit file. By Law, the company placing the default must follow a process governed by the Code of Banking Act.  A series of phone calls, letters or in some cases, a collection agency, try to come to a suitable arrangement for you to repay the amount of monies outstanding.   In some cases it is human error as we gave the financial institution the wrong account number or went on holidays and forgot to set up a payment arrangement , Other times it can come through unfortunate events in our lives like divorce.   Either way, it only takes one negative listing on your credit to have a serious effect on your ability to borrow funds in the future. So it vitally important we value of credit rating and try to keep on top of the monthly bill .

Creditors list a default is so they can establish an opportunity to locate and contact you to try and recoup the loan they have probably written off. A potential Financier will ask you to complete an application form when you apply for a new loan,. Which will almost certainly have a few paragraphs (right at the end of the application) authorizing them to perform a credit check on you. Not only does that send the red flag to the previous company (with your new details) it will have a detrimental effect on the new loan you were hoping to arrange. More often than not, the consumer is shocked to find that for one, they have a personal credit file with a company they have never heard of before  and two, that they no nothing about the default and the amount that is apparently owing .  Once the default6 is listed the chances of getting a loan with a Main steam lender is difficult until the default has been paid or cleared. Even if you do make an arrangement with the company, it will stay on your credit file for 5 years. Yes that’s correct – 5 years!!

Now before you charge into the bank screaming at the little ole bank teller 3 months from retirement, it’s quite often an error or miscommunication and can be sorted out reasonably quickly. If the default appearing on your personal credit file is showing as unpaid, you will need to get in contact with them and have that either lifted, or updated to now say that it is paid, or under arrangement. With fear of pointing the finger, Telco’s are quite keen to list these against you. After all, communication is the first step in resolving the dispute. If your phone has been cut off, that can prove rather difficult.

Privacy laws and updated banking acts have helped the consumer from the days where a ,Financial institution and telco’s would place a default ( or lack of repayment ) against you very quickly Nowadays the process is to send you a communications stating you have missed the repayments , then usually  a follow up letter reminding you that you’re behind.. From there, it starts to get serious and if the financial institution hasn’t had contact at all, will then proceed with legal action unless you make the payment immediately.

Self employed

Low documentation home loans are designed for self-employed customers, who may not have all the necessary paper work required to take out a standard home loan. The main Feature is that you avoid having to provide your most recent tax returns and in some instances, no income details at all. This can also be beneficial to seasonal, short term or any type of work that derives from an inconsistent base. But this is not the only reason the Lo doc loan was introduced. It was also designed for potential customers that have irregular income, or an unfortunate credit file history due to reasons that may have not been entirely the individuals fault. They were introduced into the market in 1999 and again the next push for securitized lenders that had ‘just saved’ us with lower variable loans. More prevalent in the US, the Lo doc loan became the no doc loan. Name, address and equity were all you needed for approval. Most experts in the financial markets could see what the future held as they had been there before when there were collapses in the share and investment markets.

The levels of arrears (loan payments behind) climbed from 2% to 9% of the overall market in one year alone. A handful of major lending Institutions reported more than 50% of their loan book having either no record or very little supporting documents to arrange the finance in the first place. With no possibility of recovering these debts, the US was the first to go down and the Australian economy, (who fared much better), still entered into a dark period of the financial world better known as the GFC. If Paul Keating was still our Prime Minister, I am sure we would have seen him all over the media outlets informing us that this is the GFC- we had to have. From that moment in time, the financial markets throughout the world, would change, and for the better.

Credit score

Credit histories or credit scores have been around here for quite some time now. It was just a few years ago when Australian banks have decided to adapt the US credit score system to effectively determine if potential clients should or should not get a certain loan. A person’s credit score will vary between the lenders and the Credit Agency Veda. This did not last long as the major assessment tool because it quickly established that the process or system was picking up potential clients that have missed their credit card payment or those that have already paid their power bill a few days late, but these clients were only the existing clients of the bank. Only the new clients of the bank will benefit here because they have no record yet. This system is still being used but only as a second opinion or backup if a certain lending application is difficult or tight for some reason like the bank has not said yes or no.

Defaults/ Arrears

Credit and credit cards, debit card and mobile phone accounts started to be recognized as a growing problem, but in an issue concerning them, the consumer is not always the one at fault. Under the banking acts, all financial institutions must strictly follow a program where every lending party is highly notified. If failed to do so, it may be impossible for a financial institution to enforce the customer while trying to get the money back. If a certain institution has no any response from its customers but have followed the procedures and policies in recovering the funds, they the financial institution can list a default right on Veda. Veda is a company that holds a credit file for an Australian who has borrowed an amount of money or loans before. Veda will list each bank that you have possibly borrowed money from, the loan amount, date and if the financial institution has registered its default notice, as a result of late or even no payment

Credit report

Do you always check your credit record or file? Is your score good? In searching for a home mortgage, you may think of various questions. In knowing your credit file, your lender will be the one to do it for you. When you have already a lending experience, a part of the application is signing an authorization that will authorize the lender to arrange your credit files that is why your loan provider will do that.

For your information, all credit reports are being done by VEDA, a credit reporting agency. It will ascertain whether you can get a loan approval or not. You may get loan decline if you will have a bad credit record, if your age is above the age requirement, and any other problems.

Refinancing is a great way for you once you do not have that capacity to pay your home and other loans. You may lose that ability when you lose your job, you are so sick, and others; however, you may experience loan decline. To sum up, the process will help you pay your home loan, and you will not be afraid paying your mortgage.