Protecting yourself from credit identity theft
Credit identity theft is a growing problem in Australia and around the world. It occurs when someone obtains your personal information, such as your name,
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Your credit score is a numerical representation of your creditworthiness, and it plays a crucial role in your financial life. Your credit score can influence your ability to obtain loans, credit cards, and mortgages, as well as the interest rates you’ll pay on those loans.
Each credit reporting agency uses different factors to calculate your credit score. However, common factors include payment history, credit utilisation, length of credit history, credit inquiries, and types of credit. Payment history considers whether you have paid your bills on time, and if you have any delinquent accounts or missed payments. Credit utilisation looks at your overall debt, including your credit card balances, loans, and other debts. Length of credit history considers how long you’ve had credit accounts, and how long it’s been since you’ve used them. Credit inquiries look at how many new credit accounts you’ve opened recently, and how many inquiries have been made on your credit report. Types of credit take into account the different types of credit accounts you have, such as credit cards, loans, and mortgages.
Credit checks can be an automated system by using computer algorithms to process data and generate a credit score based on predetermined factors. Automated credit checks can sometimes produce inaccurate credit scores, which can lead to loan denials or higher interest rates for credit customers who deserve better credit terms. Additionally, automated credit checks may not take into account individual circumstances, such as a recent job loss or a medical emergency that may have impacted a customer’s credit history, resulting in a lack of flexibility. The lack of transparency in the automated credit check system may make it difficult for customers to identify and correct any errors or inaccuracies in their credit report. Furthermore, automated credit checks may require customers to provide more personal information, which increases the risk of identity theft and other privacy concerns.
When lenders consider whether to approve a loan application, they are primarily looking for evidence that the borrower will be able to repay the loan in a timely manner. This is usually assessed based on a number of factors, including the borrower’s credit history, income, and debt-to-income ratio. Essentially, lenders are looking for evidence that the borrower is financially stable and has a good track record with credit. This helps to ensure that they will be able to repay the loan in a timely manner, reducing the risk of default for the lender.
Whenever you apply for credit, such as a credit card, loan or mortgage, lenders will usually conduct a credit check on you to determine your creditworthiness. This involves obtaining a copy of your credit report from a credit reference agency, which the lender will use to assess the risk of lending to you.
When a lender conducts a credit check on you, a record of this activity is added to your credit report in the form of a credit footprint. The credit footprint indicates which lender has conducted the search, when it was carried out, and the type of credit being applied for. If you have multiple credit footprints on your credit report in a short space of time, this can be an indication that you are applying for credit frequently, which can negatively impact your credit score.
Credit footprints remain on your credit report for up to five years, although they become less significant over time. If you have too many credit footprints on your credit report, it can indicate to lenders that you are a higher risk borrower and may result in your credit applications being declined or offered on less favourable terms. It is therefore important to only apply for credit when you need it and to make sure you keep up with any repayments on credit you already have.
Credit identity theft is a growing problem in Australia and around the world. It occurs when someone obtains your personal information, such as your name,
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