How to read a credit report: a line-by-line guide for business owners

Most owners open their credit report once: the day before a loan application, hoping nothing nasty is in it. A better habit is to read it twice a year with a pen in hand, the same way you would read a bank statement. Nearly all the damage a credit file can do is avoidable if you catch it early, and some of it is simply wrong.

This guide takes you through the report in the order you’ll meet it, explains what each section means for business lending, and finishes with a short audit you can do in about twenty minutes.

Which credit report are we talking about?

There are two different things people call a credit report, and mixing them up causes a lot of confusion.

• Your personal (consumer) credit report. Held by credit reporting bodies including Equifax, Illion and Experian. It records you as an individual: your loans, cards, enquiries, defaults and so on. This is the one the free-access rules cover, and it matters for business owners because lenders usually check the personal files of sole traders, partners, directors and guarantors.
• A business (commercial) credit report. Held by commercial bureaus and searched by ABN or ACN. It’s a paid product and sits outside the free-report rights. Our guide to how to check your business credit score covers it.

This page is about the personal report, since it’s the one you can get for free and the one that follows you into most business applications.

How do you get your report?

Each bureau owes you one free report per quarter. An extra free copy is available when a lender has turned down a credit application within the previous 90 days, or when a correction has been made to your details. Outside those situations the bureau may charge, though not an unreasonable amount.

Two practical points:

1. Ask all three. The bureaus don’t share one file, so a listing can sit on one report and be missing from another. Reading only one leaves gaps.
2. Time it around refusals. If a lender declines you, the 90-day window gives you a free report right when you most need to know why.

You’ll usually receive it within days. The bodies’ request pages are linked from the OAIC page on accessing your report.

What’s in each section?

Reports are laid out differently, but the information is the same. According to the OAIC, a consumer credit report can contain the following.

1. Identity details

Your name, date of birth, current and previous addresses, employer and driver licence number. Read this first. A wrong address or a mixed-up date of birth is how someone else’s default ends up on your file. If anything here isn’t yours, stop and ask the bureau to investigate.

2. Credit accounts

Each line names the lender, the kind of credit, the open and close dates and the limit. Hunt for anything unfamiliar. Then spot the forgotten cards: a lender treats a $20k limit as $20k you could borrow tomorrow, whatever the balance. Cancelling cards you never use shrinks that figure.

3. Repayment history

Under comprehensive credit reporting, the file shows whether each monthly repayment was on time, and how late it was if not. This is kept for two years. Read it as a calendar: a one-off late payment from a year ago matters less than a pattern. Financial hardship arrangements are also noted against the account. Our guide to comprehensive credit reporting and your business explains why this has changed what lenders can see.

4. Enquiries

Every time you apply for credit, the lender asks for your report and an enquiry is recorded, along with the type and amount of credit you sought. Enquiries stay on file for five years. One or two a year is unremarkable. Six in three months looks like someone shopping in a hurry. Look for enquiries you don’t remember: they can be a sign of identity misuse.

5. Defaults

A default goes on file once a consumer credit debt of at least $150 has run two months or more overdue. It stays for five years from listing, and the report shows whether you’ve since paid it. A paid default still appears, but it reads very differently from an unpaid one. Our page on defaults has the definition, and business loans with defaults covers how lenders respond.

6. Court judgments, bankruptcy and serious infringements

These records carry the longest memory.

The OAIC sets out how long each record is kept:

• Repayment history is the shortest at two years.
• Enquiries, defaults and court judgments each last five years.
• Bankruptcy stays for five years from the date it began, or two years after it ends if that is later.
• A serious credit infringement is held for seven years, the longest of the lot.

A serious credit infringement is a lender’s opinion, recorded on your file, that you obtained credit by fraud or were avoiding your obligations. If you see one, treat it as a priority to understand.

7. Your score, if shown

Some reports include a score. Each bureau uses its own scale and model, so a number from one isn’t comparable with another. The score is a summary. The detail underneath is what a lender reads. Our guide on how to improve your business credit score covers the levers.

What do business lenders actually do with it?

For a sole trader the personal file is the file. For a company, lenders commonly check the directors’ and guarantors’ files alongside any business credit information. They’re looking for four things:

• Capacity signals: how much existing credit you hold and how it has been repaid.
• Behaviour: late payments, defaults and judgments.
• Recent activity: clusters of enquiries.
• Consistency: whether the story in your application matches the file.

A tidy file speeds things up, and a messy one isn’t a no. Many lenders will talk about the circumstances, particularly if a default is paid and the business’s current cash flow is healthy. The problems start when an owner is surprised by something that should have been fixed a year earlier.

How do you fix something that’s wrong?

Errors come in a few forms: a debt that isn’t yours, a wrong default date, an account listed twice. The fix runs like this:

1. Collect evidence. Statements, letters, payment confirmations.
2. Write to whoever supplied the entry, or to the bureau itself, and request a fix.
3. Expect a response within a set period, along with an explanation of the outcome.
4. Escalate if the answer is unsatisfactory. Complaints can go to AFCA, and the OAIC handles credit reporting complaints too.

The OAIC explains the steps on its page about correcting your report. For a step-by-step on removing a listing that is valid but old, see how to remove a default from your credit file.

A twenty-minute audit before you apply

Do this once a year, and always before a significant application.

1. Request reports from all three bureaus and save the PDFs.
2. Check your identity details and addresses against reality.
3. List every account and confirm you know each one. Cancel unused cards.
4. Scan the repayment history for any late months. Note the lender and date.
5. Count enquiries in the last 12 months and make sure you recognise each.
6. Look for defaults, judgments and anything marked “serious”.
7. Compare the three reports and note differences.
8. Write a two-line explanation for anything a lender might ask about. Brief, factual and dated.

If an application is imminent, also read does applying for a business loan affect your credit score so you don’t create new enquiries unnecessarily.

What if the report isn’t pretty?

You still have options. Plenty of lenders work with owners whose file has a blemish: a paid default, a judgment, a rough patch after a bad year. The question they ask is whether the business can service the loan now and whether the blemish is explained. Our pages on business loans with a low credit score and business loans with defaults set out what to expect. Want a second opinion on where that leaves you? An enquiry is free to make and leaves your file alone.

Now that you’ve read it, what’s next?

You know what’s on your file, you’ve corrected what you can, and you have a short explanation ready for the rest. That’s the hard part.

If funding is the next step, the form is short, about a minute, and nothing about asking can add a mark to the file you’ve just cleaned up. Your enquiry isn’t fanned out to lenders; it lands with our team, and a person reads it before ringing you. Mention anything on your file that you know is there. A default told up front lets us look for options built around it, instead of everyone finding out halfway through.

Find options that fit my file →