Do monthly repayments matter to your credit file?
Making repayments on time to your credit accounts is important, but what impact can it have on your credit reputation?
Before the introduction of Comprehensive Credit Reporting (CCR) in 2014, only negative events were recorded on your credit file. This included defaults, bankruptcies, court judgments and similar events that could make you look like a risk to prospective lenders. Since 2014, CCR has included other records to help lenders better understand a borrower's behaviour. One new listing is your repayment history.
How is my repayment history displayed?
You'll find your repayment history details below each listing for your credit accounts. It will show the period the account has been open and the status of the account. If the account is in arrears it will indicate the number of months you have been late with your repayment. If the account is not in arrears it will indicate this with a "zero". You can see an example of each below.
Accounts in arrears:
Accounts not in arrears:
Source: ASIC's Moneysmart
How long does repayment history information stay on my file?
Repayment history information will remain on your credit file for two years. One or two late payments will not necessarily place you in the "bad credit" basket, but consistently making late payments will be a red flag to lenders and may affect your ability to access credit.
How do my repayments affect my credit file?
When lenders access your credit file they want to ensure the information you supplied in your application is accurate and that you will be able to manage the debt you are applying for. If you consistently make late repayments it can indicate that you can't manage the debt you have, while making repayments on time can indicate to a lender that you're a responsible borrower.
If you have a default listed on your file you can also keep making your repayments on time to help build up a positive credit record. Ultimately, repayment history is just another part of the risk assessment that lenders undertake when assessing your ability to manage your debts.
Why can't I see my repayment history information?
While CCR was introduced in 2014, not all credit providers have begun supplying data to credit reporting bodies, such as Equifax. However, all credit providers are still actively collecting this data, so it's important to keep making your repayments on time regardless of whether or not your provider has started sending this data to Equifax.
Now you have a better understanding of how repayments affect your credit file (and credit score), you can check your credit score for free.