When you apply for a car loan, the lender decides whether or not they wish to offer you the loan and at what price. This decision will primarily be based on your credit history. Your credit history is detailed in a credit report, which is maintained and updated by a credit reference agency. There are three main credit reference agencies in operating in Australia:
> Veda Advantage
Tel: 1300 921 621
Website: www.veda.com.au
> Dun and Bradstreet
Tel: 13 23 33 or +61 3 9828 3333
Website: www.dnb.com.au
> Tasmanian Collection Service
Tel: +61 3 6430 3755
Website: www.tascol.com.au
Credit reference agencies hold information on most Australian adults such as their registered addresses, registration on the Electoral Roll, any Court Judgements, bankruptcies and insolvencies, as well as any credit card, loan or mortgage applications. If you apply for a car loan, the lender will check your credit report and put a mark on your file. This mark stays on your report for up to five years or longer, depending on which credit reference agency holds your information.
Each time you take out a credit card, loan, or any other form of credit - a mobile phone contract for example - information about your repayments is recorded on your credit report. Paying your loan repayments on time will improve your credit rating, as it shows future lenders that you are low risk; there is little chance of them losing money, because you always repay money you owe. An improved credit rating means that you are more likely to be accepted for loans, mortgages and credit cards in the future. Importantly, it also determines how much you are allowed to borrow, as lenders will not allow you to borrow large amounts if your credit rating is poor.
Similarly, if you have never had any form of credit, you may find that lenders are unwilling to offer you large car loans; if they do, they may charge you a higher interest rate. This is because they have no credit history on which to base their lending decision; as a result they will consider you to be high risk. If you make late repayments on a loan, miss payments or only make minimum credit card payments over a long period of time, you may find your credit rating is lower, and as a result lenders will not offer you their best car loan deal.
Your credit report is not the only factor that lenders consider when assessing your car loan application; they will verify your identity, your age, your employment and salary level, determine how long you have lived at your current address and whether you own your home. It is these factors, in combination with your credit report which determine your credit score. As lenders use different credit scoring systems, your credit score will vary depending on the lender you choose. For more information about how your credit score is calculated see Credit Scoring.
For more information on credit ratings, see:
