Performing a ‘Credit Check’ can make some of us nervous. Particularly, if financial skeletons exist in your closet!
Australia currently operates under a Negative Reporting System, meaning lenders assess risk on negative reports like defaults, bankruptcy or missed bills recorded on your file. Mid-year Comprehensive Credit Reporting (CCR) will become mandatory, and banks will share 100% of information with reporting agencies. Having better information on accounts held, paid debts dates and how timely the payments have been made all help lenders make better decisions.
Additionally, we may see more ‘risk-based’ pricing models come into effect. Meaning those with the best credit scores will receive lower rates. While the opposite will be true for those with poor credit. With more data, it’s expected to increase competition among banks and drive down costs.
CCR is a positive step for many customers. Possible pros include lenders having a fairer and more complete picture of creditworthiness. The positive here is that it could balance out a negative recorded listing like a missed payment. In that, a missed phone or utility bill recorded as a default could have been enough for your mortgage application to be declined. Now it will take repeated missed or a general pattern of poor credit repayments to impact the rating.
One thing that won’t change is that lenders will still review how often you have applied for credit and how much credit you have obtained. Even if you have a low balance on your credit card/s, the lender will still assess on the total amount of credit available.
If you intend to apply for credit soon, it’s a good idea to consider consolidating loans and reduce credit card limits. CCR will also record when loans are paid and closed.
Under CCR there are several steps to take to improve your score. Firstly, if you haven’t checked your file for more than one year, please contact Loans Only so we can organise an instant free full report. Doing so will allow you to get on the front foot and rectify and blemishes. Secondly, maintain low balances on credit cards and establish direct debits to ensure all your bills are paid on time. Lastly, give serious consideration to refinancing. Benefits can include consolidating personal and credit card debts into one easy to manage payment at a lower interest rate. You could extend Interest Only terms which is important for many investors from a cash flow perspective. And with many lenders offering refinancing rebates between $1250 to $2000 and competitive interest rates you could be saving thousands on your mortgage each year.
If you would like to know more about CCR or how much money you could be saving on your mortgage and general lending, please say email@example.com
Managing Director Loans Only