If I asked you what your credit rating was, would you know?

No, seriously, if I called you up right now and asked you for your credit rating, would you know exactly what it is? Not if you’re pretty sure what it might be, but actually what it is.

If you don’t know, don’t feel bad.

Many people don’t know what their credit rating is, nor do they realise that they can find it fairly easily. And while unfamiliarity with your credit rating may not necessarily be a bad thing – it’s only really important if you’re trying to finance something like a home or vehicle – a lack of knowledge when it comes time to make financial decisions might cause you to be doing more work than necessary.

For example, are you trying to build a positive credit rating?

Many people toil under the belief that they can ‘build’ positive credit. This myth holds that if you take out a loan and make the payments, you are demonstrating your “creditworthiness” by virtue of making the payments.

And yet this isn’t true. You may not realise this, but Australia doesn’t have a positive credit reporting agency.

In layman’s terms, Australia only pays attention when you do something bad.

So if you took out a loan on a vehicle you could otherwise afford just so your credit ranking will improve, all you’re doing is paying more for that vehicle than necessary. Making payments doesn’t help your credit; worse, now you’re incurring interest on the vehicle.

However if you default on a loan or bills, you risk being hit with a black mark on your credit file.

You might say “I’d know if someone lodged a black mark against my file”.

You might be mistaken.

There’s no law saying that the person lodging the complaint is obligated to inform the client.

This means that if you skip paying the electrical bill, the electric company might penalise your credit file and you’d be none the wiser.

All is not lost however. If you’re unsure what your credit report reads, you’re legally allowed to view it for free once a year under the Privacy of Information Act. Just go to www.mycreditfile.com.au to find yours.

Second, even if your credit report is less than favorable, you may not be precluded from securing a loan. Many people think their options are limited when it comes to lenders, but there are more possibilities than people realize. This is where a professional finance coach will come in handy.

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