In 2014 the government made amendments to the Privacy Act 1988 permitting lenders to provide information to credit reporting agencies on more than just defaults. It allowed lenders to report on repayment history, including missed or late payments.
Up to now however, lenders have not applied this more comprehensive method of credit reporting. As a result, the federal government announced that it will mandate comprehensive credit reporting by July 2018. This will make it compulsory for lenders to provide full disclosure to credit reporting agencies on your repayment history. The move will initially apply only to the major banks, but it is expected to filter down to the rest of the industry shortly thereafter.
What does this mean?
It means that your financial institution is now required to share your credit liability information and your repayment history by providing details of whether your payments have been made on time OR NOT. If you fail to make loan or credit card payments on time, it may affect your ability to obtain credit in the future.
Who does this affect?
It affects anyone who has credit over the age of 18.
You will have an existing credit report if you have applied for any form of credit. This can include:
- Phone contracts
- Credit cards
- Residential or personal loans
- Hire purchase or car loans
What does this mean for you?
If you’ve been good (and I mean really good) – then not much.
If you’ve been bad, then we have some work to do.
What is bad?
If you have ever:
- Made a late payment or missed a payment (even unintentionally).
- Overextended your credit card (even just a little).
- Had overdue accounts or payment defaults.
What does this mean when you are applying for a loan? If one bank rejects you, then the next one will more than likely too, even if they don’t know the other lender’s reason.
This is where we can help. We can assess your credit file and review lenders who are more suited to your situation. You need a mortgage broker now more than ever… gone are the days when you can go to a bank to negotiate your own mortgage.
Alternatively, if your credit file is positive, we can negotiate better terms and interest rates on your behalf.
What next?
Your credit information will be available to all financial institutions. What can you do to maintain or achieve a good credit rating?
- Keep an eye on your repayments – DO NOT be late or miss them.
- Don’t overuse your credit card.
- Don’t apply for too much credit.
- Use direct debit to pay your bills on time – most institutions allow you to direct debit the minimum balance EVERY month. Even if you like to pay the balance in full this will ensure your payment is made on time. You can then pay the additional (balance) each month as you please.
- If you are going away for an extended period and you know a bill will be due, then schedule the payment for the due date via internet banking – or ask someone else to pay it while you’re away (if you can trust them to pay it on time). But can you really afford to put this responsibility in the hands of other people? You simply cannot do a double payment in March to cover a payment for April. It has to be scheduled against the actual date.
So, what’s the good news?
- Lenders will now have a better understanding of your credit needs and your ability to repay any debts.
- If you have an excellent payment history, this WILL HELP YOU obtain finance in the future.
- You can complain if you think the information held or shared about you has been mishandled.
If you are thinking of reviewing your current finance or obtaining further finance, and you are concerned your credit report may be affected, contact us today to discuss.