The real life guide: Your credit report

What affects credit reporting

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  What is Bad Credit?  |    Impacts of a Bad Credit Score  |    What is a Credit Score? |    Keeping a Healthy Credit Score  |    Overcoming a bad credit history  |    Dealing with Declines


If you’ve missed a payment or defaulted on a utility bill, credit card or personal loan in the past, then you might find yourself with a less-than-stellar credit score. If you’ve got credit repayment issues, getting a home loan can be a challenge.

This real life guide explains the credit report problems that might affect your ability to get a home loan and what steps you can take to improve your credit report.


What is bad credit?

Bad credit, or ‘adverse credit’ as it’s sometimes called, is when you have a lower-than-average credit score, which can impact your ability to get new credit.

What are the reasons for a lower credit score?

It helps to know the reasons why you might have been declined for a loan or credit card. Some common things that might lower your credit rating are:

Missed loan repayments
Missed loan repayments
Missed or late credit card payments
Missed or late credit card payments
Exceeding a credit card limit
Exceeding a credit card limit
Multiple recent credit enquiries
Multiple recent credit enquiries
Previous bankruptcies
Previous bankruptcies


Registered credit defaults
Registered credit defaults

What are the impacts of a bad credit score?

Unfortunately, a low credit score can mean that some lenders will not approve a loan application.  This is because the information on your credit report tells the new credit provider how you’ve treated existing and past debts, which gives them an indication of how you’re likely to pay back the new debt.  This is called ‘creditworthiness’.

Other lenders might accept your loan application – but they could apply a higher interest rate to your loan, because you represent a higher risk.

How long does bad credit last in Australia?

How long 'bad' credit lasts for is hard to quantify, as different elements are recorded for different time periods. Any credit issues (such as defaults) stay on your credit report for six years from the date they were recorded. This means that if you defaulted on a bill, it will still be reflected on your credit score for six years. Meanwhile the previous 24 months of repayment history from your open and recently closed credit accounts is recorded on your report. Credit enquiries (for example, applying for credit cards or loans) are split into two buckets; recent and historical enquiries. Recent enquiries are classed within the past three months, while overall enquiries are recorded for six years.

You could ask your financial institution to reduce your credit card limit, this will cap the amount you can spend and keep your level of debt under control. It’s always better to get into the habit of managing your money, rather than allowing credit card debt to grow. If you have outstanding debt more than one credit card, you should consider taking action immediately to address the problem.

What exactly is a credit score?

Credit reporting bureaus (well-known ones in Australia include Illion, Experian and Equifax) use credit reporting data to calculate an individual’s credit score. A credit score considers the following:

  • Your repayment history of loans and other credit facilities (specifically if you have missed minimum monthly repayments)
  • Any defaults
  • The types and numbers of credit limits
  • The dates credit facilities were opened and closed
  • The number of recent credit enquiries (like credit card, store card or loan applications)
  • The types of credit applied for

Credit scores typically range from 0 to 1000. Generally, the higher the credit score, the better. 

As of 1 July 2021, banks are now required to provide a holistic picture of your credit history – showing both positive and negative data. This means that positive credit behaviour can balance out issues you've had in the past. 

So, if you've had a couple of credit issues previously, then all is not lost – you can work to create positive credit activity that shows you’re a creditworthy borrower.

How can I keep my credit score healthy?

how to keep your credit score healthy

Be smart when applying for credit

Your credit report will show when and how many times you’ve tried to access credit, and this can impact your credit rating. Keep your credit score healthy by:

  • Only applying for credit when you need it
  • Doing your research beforehand – find out when a credit enquiry will be completed on your credit file
  • Not borrowing more than you can handle
  • Prioritising repaying existing debt before applying for more credit
  • Accepting a smaller credit limit whenever possible, and turning down credit limit increases that you may be offered
  • Speaking to your lender if you are struggling to make repayments
how to do an annual credit health check

Do an annual credit health check

You can access your credit score for free every three months through credit reporting bodies Illion, Experian and Equifax. This could help you:

  • Plan ahead so you’ll be in a good position when the time comes to apply for a loan or credit card. If your credit score needs to improve you can work on improving it before applying.
  • Contact credit reporting bodies Illion, Experian and Equifax if there are errors in your credit report. You can get any errors fixed for free.
  • Be alert to fraud. Check your credit report to ensure that no one is using your name or identity to take out loans or other credit. Learn more about protecting your identity here.

What can I do if I have a bad credit history?

1. Get on top of your credit report – and fix the problems

The first thing you should do is get a copy of your credit report. Having a copy is the first step in planning to improve your score. You can make sure you’re aware of the positive and negative reporting on your credit report. And you can check if there’s something in there you’re not aware of, or even mistakes.

If any information is wrong, then make a request to have it corrected so that it doesn’t continue to affect your credit report.  Speak to a credit reporting agency, or the relevant credit provider if you believe there has been an error.

Defaults will remain on your credit report for five years, however they can change to a ‘paid default’ if the debt is repaid. In addition, many lenders will want to know what actions you’ve taken to address any past credit problems, so it’s best to make sure that any defaults get paid off.

2. Consider consolidating your debts

Consolidating your debts may be an option; either through a personal loan facility or rolling multiple debts into your home loan. This could reduce the number of repayments you need to make each month, whilst also minimising the number of open credit accounts listed on your credit report. This may make your finances easier to manage by making fewer payments each month, and if you find the right lender, you might just save on interest and loan admin fees, too.

3. Shop around

Your credit score may have resulted in a declined loan with the first lender you applied with, but there may be others who can help; lenders may have different criteria for loan applications.

It’s important to remember that multiple credit applications within a short time frame can be harmful to your credit score – so ensure that you do your research before submitting an application for a loan.

4. Consider lenders with alternative scoring model or credit assessment approaches

Many traditional lenders use an automated credit-scoring model to determine whether or not your loan should be approved. A specialist lender (like Pepper Money) will look at your individual application and consider your current financial situation in addition to your credit report.

What can I do if the banks have already declined my home loan application?

You don’t have to give up at the first no. Having a home loan application declined happens to many people every year and it can be discouraging to say the least. However, the good news is there can often still be a way forward by looking to alternative lenders that may offer more real life options.

find out mainstream banks' credit policy and lending criteria

Understanding mainstream banks’ lending criteria can help

The ‘big four’ often offer some of the lowest headline interest rates, however they also often have the strictest credit eligibility criteria. This means, for example, that their home loans are only available to customers with a good-sized deposit, a PAYG income with enough buffer to withstand rate rises, and a squeaky-clean credit history.

This means, as a borrower, you may have had no issues getting a loan previously, but you might be declined today because of changes to a lender’s credit policy and criteria. If your credit history is the only thing holding you back, you may want to consider a lender such as Pepper Money.

lenders like Pepper Money offer real life loan options

Lenders like us offer real life loan options – we may be able to help

While it can be disheartening to have been declined a home loan due to your credit history, there may be light at the end of the tunnel. We look at each case on its merits, meaning your application is assessed individually by an underwriter against our loan eligibility and credit assessment criteria – and your overall credit situation.

So your application is assessed on its overall merits, by a person, not simply judged against an overarching credit score by a computer. This means that if you have defaults or judgements on your credit report, we may still be able to consider your application.

Resources for credit issues

Resources that can help when you are dealing with credit issues

The Government website, Money Smart, has a really helpful section on budgeting with some easy-to-use calculators, including a simple downloadable budget planner.

They also offer resources to help people dealing with debt collectors.

And if you are feeling overwhelmed, don’t do it alone. Money Smart offer places to get help if you need support.

Remember you can always speak to us here at Pepper Money on 137 377 if you’re unsure on where you stand.

You might also ask:

What is considered impaired credit?

While there is no strict definition, someone that is considered to have 'impaired credit' would have a substantially lower-than-average credit score and may struggle to get finance or a line of credit approved from a mainstream lender.
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