I recently applied for finance through a new lender and gave them a list of our assets and liabilities as well as an explanation of our complex company group structure.

After a few days they came back and asked me about my directorship of 4 companies that I knew nothing about.

You see ... the bank checked my credit file stored centrally with Baycorp Advantage (formerly CRAA) and somehow there was an error there. In this case the error was in my favour - these were substantial companies, but they were not mine.

I have heard of others not obtaining finance because of incorrect or outdated information on their credit file.

So before the banks or financial organisations take a look at your credit file, why don't you?

If you have applied for credit in the past 7 years it is likely you have a credit file and whenever you apply for credit that extends beyond 7 days, the institution you are applying to is entitled to examine that file.

Any credit applications you have made during the past 5 years will be included in this file, outlining details including when you applied for credit, to whom, for how much and whether the application was successful.

• Your credit files contain:
  Personal detail such as your name, address, date of birth and licence number
• Any credit applications and inquiries you have made during the past 5 years
• Records of some current credit accounts
• Details of any defaults or overdue accounts that may have been listed against your name
• Bankruptcy information
• Court judgments, writs or summonses
• Any public record information such as directorships and proprietorships
• Standard defaults on accounts you have not paid remain listed on your credit report for 5 years and are only removed only after being paid in full. A bankruptcy stays on your file for 7 years.

The number of addresses shown on your credit report for the past 5 years can make a difference to the lender as can the suburb you live in. Even the number of loan applications you have made could influence their decision.

If there are too many applications in a short period of time, this can go against a person in obtaining a loan. The type of finance company you have applied to will also affect your application.

Improving Your Credit Rating

1. Timing your application
Almost all credit rating systems are sensitive to the time that you have been in your home and job. You will almost certainly get a much better credit rating if you apply for credit before you leave one job to start another, or before you move house.

Most credit rating systems are also very sensitive to anniversaries. For example, it is better to be in a job just over one year rather than just under one year. If you are coming up to an anniversary at either your job or at your home, then it may be better to delay your credit application until just after an anniversary has occurred.

2. Finance applications
Always complete all the details you can on a finance application honestly. Unanswered questions can trigger low credit ratings. It is important to answer every question as questions you may not think are important may actually have a big impact on your credit rating.

3. Disputes
Many defaults are as a result of a disputed invoice and are often for less than $500. Don't take the moral high ground over minor claims by just not paying when you have a dispute with a supplier such as a phone or power company. Even if you are in the right and eventually win the case, the default will remain against your name and you will have to prove it has been paid.

PERSONAL CREDIT REPORTS
As a property investor understanding your personal credit rating is important. It is easy to find out what is on your credit report. The main credit rating agency in Australia, Baycorp Advantage (formally CRAA), will have your file on record. Obtaining your personal credit record is free, although if you want it within 24 hours it will cost about $20.

Visit http://www.mycreditfile.com.au and to learn more about credit ratings http://www.vedaadvantage.com/

Michael Yardney is a best selling author and one of Australia’s leading experts in the psychology of success and wealth creation through property. He is Australia's most published property author and has probably educated more successful property investors than anyone else in Australia. Go to www.metropole.com.au