Most people apply for credit at some stage in their lives. Whether the finance is for a home loan or a car loan, a holiday or even a mobile phone contract - credit seems to be everywhere. Applying for credit can be daunting because there is always a chance the credit provider will refuse your application. When you apply for a loan, the lending institution has an obligation to you and its shareholders to reasonably believe you are able to repay the debt. This being the case, they may (and often do) refuse credit if they feel the risk is too high.Most creditors will have minimum criteria they follow when it comes to approving credit applications. This is when your credit file / previous credit history is taken into account.

When you complete a loan application, credit providers will request your permission to obtain a copy of your credit file and they will use this, in conjunction with the information provided by you to assess your credit worthiness.

Generally speaking, if you are unemployed or have previously been a bankrupt, obtaining credit will be a challenge. Credit providers may mitigate the risk by charging higher interest, but it would not be unusual if in these circumstances the credit is refused.

Another factor that may hinder a successful application includes a previous credit default. According the credit reporting agency Veda Advantage, "...All overdue accounts listed as a payment default remain on file for five years from the date of listing. All overdue accounts listed as a clearout remain on file for seven years. Even when the account has been finalised, overdue accounts remain on file for the specified five or seven years as above. The entry is simply updated to reflect it was paid in full, settled or brought up to date. The fact that an account has become overdue, and then been finalised becomes part of your credit history..."

Debt Fix recommends you obtain a copy of your credit file at least once a year and see for yourself what information is recorded on it. To obtain a copy of your credit history all you need to do is apply on line by going to www.mycreditfile.com.au. In a nutshell, your credit file is your credit reputation so it's important to make sure it's accurately reflects your credit history.

If you obtain your credit file and find there is an error, it's important to have this corrected. You will need to approach the company that placed the entry on the file and request they amend/remove the entry. They have a legal obligation to report entries accurately and correct errors within a specified time.

But what happens if your previous credit history is "colourful" and you want to borrow funds? This is a really common problem and essentially there are a couple of choices. Firstly, depending on how bad your previous credit history is and if you find a company willing to lend you funds, you need to be comfortable with the fact they are likely to charge you a higher interest rate than the standard variable. If this is not suitable, then you should consider waiting and use that time to pay any outstanding credit defaults and previous financial indiscretions.

Debt Fix specialises in bridging the gap between people with unmanageable debts and their creditors. Debt Fix is a company committed to helping people resolve their debt crisis. Contact Debt Fix today on 1300 332 834 or www.debtfix.com.au and you will be on your way to being debt free.