In many ways, credit scores can be like ex-partners. When things end amicably, you go out into the world as better versions of yourselves. But when they end badly, the memory of those moments can follow you around for years to come, as we’ve seen play out recently in the NSW Supreme Court.
For those unfamiliar with the story, a problem first arose last year when the Reserve Bank handed down an interest rate cut, about which St George Bank then notified its customers. In its correspondence with a woman named Fiona Vinall, the bank said the reduced rate would see her pay $44.11 less on her mortgage repayments “after July 10”. On the surface, that’s a great money win!
Unfortunately, it wasn’t quite that straightforward. Vinall understandably interpreted the email to mean that any repayments made throughout the month of July, but after the 10th, could be for the revised amount. But according to St George, what they meant by “after July 10” was actually from August 1. As such, the bank automatically clocked one of the repayments as being in deficit.
Despite the bank quickly identifying and rectifying the issue, the two parties now find themselves in court because of what transpired in those few short weeks between the bank’s initial email and the missing $44.11 being repaid.
In Australia, banks are legally required to inform credit-rating agencies of shortfalls within 14 days – even if it’s for an amount less than $50 on a loan literally the size of a house. That means St George reported Vinall’s under-payment as “adverse repayment history information”, and that subsequently, her credit score deteriorated. So much so that when months later she bought a new property, she was unable to settle because of her newly negative credit rating.
When Vinall contacted St George and requested the notice be removed, the bank refused. But where many people would feel overwhelmed and think they had no power against a major banking institution, she refused to lie down, took a huge risk and began legal proceedings.
Always read the fine print, ask questions if you don’t understand what something means, and keep a record of any correspondence.
At a preliminary hearing in January, a judge ordered the black mark on her credit score to be removed by the bank. But that didn’t happen, possibly because nobody bothered to appear on behalf of the bank and neither Vinall nor the court could get in touch with them.
Then at a hearing in early February, where representatives did appear, the bank doubled down and said it couldn’t undo the adverse credit information. All it could do, they said, was request the credit agency to which they had passed the information to update the information. But when pressed, they admitted they hadn’t asked for that to be done either.
Incredibly, it was only when the court said the chief executive of Westpac (which owns St George) would be required to appear and justify the bank’s actions that the matter was resolved. And incredibly, it managed to be sorted within a few short days, and over a weekend.
Justice David Hammerschlag, who was overseeing the matter, didn’t mince his words in his judgement, saying the bank’s wording in its original email was “at best ambiguous, and at worst likely to mislead”.
He also said the bank’s refusal to resolve an issue over such a relatively small amount of money was “legally unjustifiable and short on commercial morality”.
“Having regard to the de minimis [trivial] dimensions of the shortfall, the substantially unequal bargaining position of the parties, the profound adverse consequences for the plaintiff of the adverse credit reporting being maintained … not taking steps to erase the recorded event was unconscionable.”
The good news for Vinall is that her previously positive credit rating has been reinstated, and Westpac has been ordered to pay her legal costs. But we’d be naive to think everyone has such a positive outcome when it comes to credit-score disputes and the long-term impact they can have.
Let’s say, for example, you skip a few loan repayments in your early 20s because you’re busy having fun and prioritising travel or nights out over buy now pay later bills. Even if you get your act together and change your ways, those decisions could impact you when you’re 30.
During those years, you might try to buy a car or your first home. You might even just want to apply for a credit card with a relatively conservative limit. But if your credit score is negative, you could be in trouble.
That’s because even though most lenders report to credit agencies monthly, meaning your credit score is regularly updated, negative information tends to stay on your credit report for seven years.
So even if you have A+ habits for six years, those wayward early years can still linger and haunt you long after you’ve broken up with them and moved on. The silver lining is that the more positive money behaviour you show, the better your score becomes, and you’ll be seen as less risky according to lenders.
But if you’re someone like Vinall, who had incorrect information applied to her credit report due to a misunderstanding, it’s essential that the record be corrected as soon as possible. For me, her case has highlighted three things that we all need to remember when it comes to money and repayments.
The first is that you should always always always pay on time. Whether that’s through setting up automated withdrawals, paying a bill the minute it arrives, or setting reminders, find a method that works for you and stick to it religiously.
And if there are times that you can’t make the due date, call to discuss your situation and come up with a plan that both parties can agree to and that’s noted in your file.
The second reminder is to always read the fine print, ask questions if you don’t understand what something means, and keep a record of any correspondence or phone calls. Ideally, you’ll never need these, but if the day comes that you do need to dispute something you’ll be glad to have them.
Finally, if something is on your credit report that you don’t think should be there – say something and keep saying it until the matter is resolved. As Vinall proved, it took her going all the way to the Supreme Court for the bank to relent, but ultimately, she was vindicated. That’s $44.11 well spent in my books.
Victoria Devine is an award-winning retired financial adviser, a bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.
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Victoria Devine is an award-winning retired financial adviser, best-selling author, and host of Australia’s number one finance podcast, She’s on the Money. Victoria is also the founder and managing director of Zella Money.
