As liquidators and bankruptcy trustees, insolvency experts generally, we are often confronted with questions from company directors and individuals†who have†concerns about their credit record being negatively affected.

The advice contained in this article is worthwhile and hence is listed in our blog.

At the end of the day,†there are situations that†people cannot avoid and while there will be some negative affect on credit rating,†both liquidation and bankruptcy will provide breathing space from an overwhleming debt situation and allow a new and fresh financial start.

“Step 1 – Know your credit
BEFORE banks or non-bank lenders lend you money for a car or a home, or phone companies enter into a mobile phone contract with you, they look at your credit record to assess whether you have a good record of repaying your debts.

A bad credit file can cost you a lot in the long term. If you havenít paid your bills, or if you’ve had your power cut off, your car repossessed or skipped payments, exceeded card limits or defaulted, you could be refused a loan or be charged a higher interest rate.

You can obtain a copy of your credit file for free within 10 working days by contacting Veda Advantage at www.mycreditfile.com.au (alternatively, you can pay a fee to have your credit file delivered more quickly).

Importantly they contain records of overdue payments of 60 days or more when you have been sent a letter notifying you of the default. Also ëclear outí listings – when the credit provider has unsuccessfully tried to contact you in writing and has reported you as a missing debtor.

Step 2 – Clear up any disputed credit records
If you believe that a bank or phone company has unfairly listed an overdue account on your credit file, you should contact them and ask for an explanation and for the incorrect infotmation to be immediately rectified.

If you are not happy with the explanation you receive, call the Banking and Financial Services Ombudsman (http://www.bfso.org.au) or the Telecommunications Industry Ombudsman (www.tio.com.au)

Step 3 – Improve your credit
To change a bad credit record into a good one, use credit as much as you can, meeting all repayments on time, so the good record outweighs the bad.

You do not have to spend more, just put all your spending (bills, groceries, petrol, transport pre-pay tickets) on a credit card and pay it off every month.

You can arrange with your bank to have your card paid automatically from your savings or transaction account.

Apply the same strategy to buying a tv or washing machine ñ take a loan or buy on instalments (make sure you can afford it) just to get the credit rating points. Put any regular family bills you can afford in your name.

Step 4 – Get help from family and friends
Get someone else to check you are paying your instalments and bills each month – a parent, friend or partner. Think of other ways to get organized, so you can borrow your way out of trouble.”