Credit History's Now More Visible
Did you know your credit score could have changed dramatically from July 1?
Lenders can now learn a lot more about borrowers as of July 1, with banks required to share more data on applicants than ever before. The full implementation of comprehensive credit reporting means everyone’s credit score is likely to change.
It’s set to be a game-changer for many borrowers, but some experts say there are risks as well as rewards.
Prior to March 2014, only negative credit events were shared between institutions. This meant borrowers’ positive credit histories weren’t always taken into account when they were assessed for a loan. Negative events included late repayments, defaults, bankruptcies and court judgments, but also the number of credit cards borrowers had or had applied for.
Positive credit reporting started in 2014, although most big banks didn’t take it up. But starting last year, the big banks were required to report 50 per cent of their positive credit transactions. These include regular payment histories, what accounts borrowers have, and what types of credit they use.
Almost all credit scores are set to change, and this will affect the interest rate are offered. Domain Loan Finder chief executive Rob Towey said comprehensive credit reporting would allow lenders to see two years of positive repayment history. These changes will work in favour for some, however others will now be viewed as less attractive.
He said Australians didn’t pay a lot of attention to their credit rating, despite it potentially improving their negotiating position when attempting to access cheaper finance from banks. An awareness of their credit rating affects how aggressively they can negotiate with lenders.
The changes will also speed up the application process with credit approvals being far more automated. Also, those with a very good credit score will get a low price to reflect the low risk to the borrower.
In terms of lender competition, smaller lenders will now be better equipped to assess how borrowers perform with other financial institutions. It will open up opportunities for these smaller competitors to build a stronger business and make more proactive offers.
Would you like to know more about your credit score and what the new changes mean for you? Send me a message HERE, and I can put you in touch with a great mortgage specialist.
The above information has been sourced from Domain. To read the full article CLICK HERE.