With the new changes to the consumer credit report there has been some misconceptions about what can be placed on your credit file. The billing overdue fee warnings are now prominently placed above the payment due box stating “OVERDUE payment may incur a $15 late fee.” But, can they charge this fee? And will a non-payment of bills see your credit rating plummet?
In March last year the credit reporting laws changed. This significant legislation change affected personal finances in a way that most people wouldn’t know about. And it’s worth knowing about! If you are not familiar with a credit report it’s a file that rates your personal finance history. A document only available to banks and credit providers that hold an Australian Credit Licence for assessment of your capacity to pay for their services and what fees they should charge to cover their risk. It’s a definite go to document for them to decide whether to approve or deny a loan or credit card application.
However, it’s good to note that these changes are only a year old and we are unsure of what impact they will have on creditors decisions when it comes to credit and whether the information will impede access to credit. Your credit score may not be the only reason credit application was refused. There are common lending requirements to show your ability to service the loan e.g. history of savings, regular income.
A survey conducted by VEDA found that up to 80% of consumers aren’t aware of the report and that they have one. Previously the credit report reflected whether or not a person has been denied credit for products like a home loan or a credit card. Changes to the legislation saw a change of focus towards listing a person’s capacity to service their credit. This system essentially shows a more accurate representation of how well you’re doing on the big stuff.
This misconception that overdue bills are placed onto a person’s credit file is favourable towards the overdue late payment threat but it is inaccurate. Privacy fact sheet 34, produced by the Office of the Australian Information Commissioner, clearly states that a person’s consumer credit report will NOT include information about whether or not you missed payments in relation to your electricity, water or gas bill; telecommunications contracts, public transport or toll road bills; and bill for other goods and services provided to you on credit.
And did you know that paying late fees may not be enforceable? After a win against ANZ bank over their extraordinary bank fees, legal teams are now looking at class actions against major telcos. Companies known for their extreme late payment fees are now under the spotlight. It is suggested that in Australian law late payment fees are considered penalties and are therefore unenforceable.
However while those proceedings take place, customers will still be slugged with overdue fees and may even have their services cut if they don’t pay them. Seems a bit unfair doesn’t it? What can you do?
You have to take more responsibility for your finances to minimise the risk of being slapped with a late fee. Essentially you need to pay your bills on time. There are a few ways to do this.
- Set up a regular direct deposit from your account. Some services offer the option but every bank has the ability to set up your own online.
- Set reminders on your phone and when you receive your bills add a reminder for the day before the due date.
- Does your bank have a mobile app? Download it. There are also apps available that can predict your bill cycle and prompt you when its pay up time.
For those of you totally unaware of what your credit score is, you can apply for a free report to be sent to you. Some companies ask for payment for elaborate documents but you are eligible to receive your report once a year for free. Apply for it and see where you stand.
If you find yourself looking a little dodgy or are getting knocked back for loans unexpectedly then work your way through your credit report to see if each bad entry is valid and even if it is contact the relevant companies and ask them what you can do to get their bad credit claim removed. We don’t recommend you use a credit repair company that charge big dollars to do this for you. It isn’t worth the money when you can make a few phone calls yourself. If the credit score is reflecting serious defaults no amount of money given to a company claiming they can remove the debt default is going to be enough. You’ll have to wait out the 5 year period.
If you want to be more informed try Privacy fact sheet 34: Repayment history information and your credit report.
If you’re facing financial hardship we are here to talk about a solution. Call us on 1300 887 211 or Book a Free No Obligation Phone Consultation with our friendly team and we can discuss debt management options specially focused on your personal situation.