Written by: Nick Bregozzo
If you're struggling to get a consolidation loan, your very first move should be to get a copy of your credit report.

Your credit record is essentially your financial reputation and indicates to credit providers your credit worthiness. If there are any entries on your credit file that reflect a less than perfect credit history, then your credit worthiness is negatively impacted and the prospect of a successful application for a consolidation loan (or any loan for that matter) is unlikely.

Understanding your credit file is a must. The website, www.mycreditfile.com.au is a great place to learn more about the entries that may appear on your credit file and how they impact your credit reputation. You can also obtain a copy of your credit report from this site. As a rule, we recommend that every gets a copy of their credit file annually to assess its condition. Much like going to a doctor for a health check, you should obtain a copy of your credit file for a financial assessment of your credit reputation on a regular basis.

It may surprise you that an estimated quarter of credit files include some sort of error or mistake. For obvious reasons, if your credit record has an error or two on it, you will have a much harder time obtaining finance and therefore your indebtedness could be prolonged. Alternative, you may find the only credit you can get is really expensive and the attractive, low interest offers are beyond reach. This is another sign that your credit history may be impaired.

So what do you do if your credit reputation has been impugned? You may want to investigate the possibility of repairing your credit file. There are a number of companies that offer credit repair services and in many cases they do a great job however, be prepared to pay for the service. Credit repair companies need to investigate your credit file and examine whether there are any "contestable" entries. This takes time and money and there is no guarantee they will achieve the result you are hoping for.

In other words if you have been credit defaulted, and the way the credit provider has reported you to a credit reporting agency is legitimate and in line with the laws that dictate the process, then it is unlikely that the default can be removed.

Often debt collectors will say; ”pay the debt and we’ll remove the default”. It’s important to know that your credit reputation can’t be used as a bargaining chip for debt collectors and stands alone as an accurate reflection of your credit reputation. If you could remove listings on your credit file at whim, it would diminish the integrity of the file and credit providers would be unable to rely on it as an accurate reflection of your credit reputation. This being said, all too often, the only thing that will fix your credit file is time.

So, now that you have your credit file what’s next? You need to understand what is on your file and how it impacts your ability to obtain credit. Depending on the information contained within the record, you need understand the severity of the entries and the length of time those entries will be recorded.

In life we have been conditioned to shop around for the best deal, however when it comes to credit it not a good idea. The reason for this is that the more you shop for credit, the more likely credit providers will reject your credit application. This is counter-intuitive to what we’ve been taught but it is a fact that needs to be advertised broadly.

This means that you need to do some homework before you apply for credit. It’s recommended you look at comparison sites and speak with your bank or the financial institution that knows you the best. You need to consider whether you want a secured loan or an unsecured loan and how this impacts you. Simply, a secured loan exists when you offer an asset as collateral to mitigate the risk to the lending institution and in saying this, a secured loan will generally attract a lower rate of interest as the risk is lower.

So, here are my top 5 tips to understanding your credit reputation:

  1. Get a copy of your credit file regularly. Once a year is good.
  2. Education. Know what is on your credit history and how it affects you
  3. Improve you credit history — pay your bills on time.
  4. Don’t shop around for credit, rather research first and make one, strong application
  5. Don’t believe debt collectors when they try to use your credit file as a bargaining chip