The risks you’re taking with credit this Christmas
The risks you’re taking with credit this Christmas that could see you left without a home
20 November 2012
A consumer advocate for accurate credit reporting warns Australians who use credit over the Christmas period they should be cautious about the ways their credit rating can be put at risk, which could see them refused finance in the New Year.
CEO of MyCRA Credit Rating Repairs, Graham Doessel says after the highs of Christmas, the New Year can see people weighed down by credit stress, and the reason is not always due to overspending.
"Many people throw things on credit at Christmas and think nothing of it, but we should be on guard for the ways this can potentially lead to credit stress and bad credit history in the following months.”
“If you're lumbered with a bad credit rating, you're generally locked out of mainstream credit for a significant time – between 5 and 7 years. You can be refused a home loan, and most other credit for that matter - even mobile phone plans." Mr Doessel says.
He says people
have an increased risk of damaging their credit rating
during Christmas and covers 5 major ways this can occur:
1. Identity theft.
Identity theft and fraud has grown in severity and volume to now be the fastest growing crime in Australia. [i]
Scammers are out in full force at Christmas, people can be lax with their personal information and credit cards are used more frequently and at a variety of locations.
Security company, McAfee's recently released their warning '12 scams of Christmas' hoping to warn consumers about where cybercriminals may be looking to take advantage of consumers over the festive months. Scams warnings are given for fake vacations, fake gifts and e-cards, malicious mobile apps and a multitude of online dangers including bogus websites and phishing scams. [ii]
"If fraudsters are able to get hold of your personal
details they have the key to your good credit rating. They
can run up credit all over town in your name. Often it's not
until you apply for credit in your own right and are refused
that you realise your credit file has been misused - but by
then it's too late. Your life is basically set to be turned
upside down," Mr Doessel says.
2. Overlooking bill payments.
With the busy lead up to Christmas, some people can find they overlook repayment of basic accounts. Then if they go on vacation, it can easily escalate the overdue account into default status.
"Overdue bills for as little as $100 can be just as damaging to your credit file as missing a mortgage repayment. Any credit account which is more than 60 days overdue can be listed by the Creditor and will show on your credit rating. Basically any negative listing will hinder your chances of getting credit in the future," Mr Doessel says.
3. Moving and transfers.
"A change of address is a very common reason bills and warning notices go unnoticed and unpaid – and you can have a bad credit rating attached to you that you have no idea about until you apply for a home loan," he says.
As Christmas and New Year is a very common time for transfers and other work changes to occur that could see people moving interstate, people should tie up all loose ends at their current address, ensuring all changes of address and accounts are settled and confirmed in writing to avoid being blacklisted for credit.
4. Over committing and spiralling into debt.
Some people feel the pressure to give so much they do so at the expense of their own budget and ultimately end up with a debt they cannot pay back.
The consequence of this can be getting
into more debt to pay the original debt. People then end up
with loan commitments they can't meet or other bills get
neglected because they just can't afford to pay it all.
Creditors start to close in and their credit file is
5. Overlooking errors and omissions from Creditors.
Creditors may also be affected by Christmas. The volume of transactions may increase while staff decrease, putting pressure on some Creditors' systems.
For this reason it is crucial for people to keep watch on their own finances.
"Despite being a busy period for all families, it is important to check your bank statements and bills at this time. Creditors can and do make mistakes with billing. Also keep abreast of which bills are due and when. If you notice you haven't received a bill and you believe it's due, you should chase it up. No news is in this case not good news, and could mean you have an overdue account noted on your file," he says.
Christmas is also a
good time for people to check their credit file. They can
request a free copy of their credit file from one or more of
the credit reporting agencies and a credit report will be
sent within 10 working days.
"If there are errors on your credit report, or it contains negative listings - defaults, writs or Judgments which are unfair or shouldn't be there, then it is important to know you have the right to have them rectified or removed," Mr Doessel says.
Contact MyCRA Credit Rating Repairs for more information on credit rating repair on 1300 667 218.