New credit reporting system to benefit prudent investors
Posted on Monday, March 10 2014 at 2:03 PM
The majority of people should benefit from a new credit reporting system, which takes effect this week, according to Smartline Personal Mortgage Advisers.
Smartline’s
Michael Daniels says those who manage their money well are more likely to be
rewarded with lower finance costs.
The changes to
the Privacy Act
on March 12 mean there will now be increased transparency with the new
comprehensive credit reporting system and it should allow lenders to offer more
attractive terms to those customers deemed to be a low risk.
It will see
Australia move from the existing ‘negative’ credit reporting system, which
means only negative information about credit history, such as defaults and
bankruptcies, and applications for credit can be reported.
The more detailed
information that will increasingly be available will allow credit providers to
access more comprehensive information, that should assist them to make better
lending decisions, according to Daniels.
“This means they
can make better informed decisions about an individual’s financial situation
and the likelihood of them not meeting their obligations,” Daniels says.
“Those who are
viewed as not being a strong manager of their money will most likely either
find it harder to access funds and/or pay a premium in the form of higher
rates.
“With access to
much more detailed information about a person’s management of their debt
obligations, it makes sense that lenders should be able to provide money to
those who manage their money well at a cheaper rate.”
The main changes
include:
–
Information
about your monthly repayment conduct and whether or not you have paid on time
over the past two years can now be reported.
–
If
you apply for credit, the decision to decline or approve it by the credit
provider can now be reported.
–
The
current limit on all of your credit cards can now be reported.
–
The
repayment term and repayment type on all of your credit facilities can now be
reported.
–
A
credit provider can now also provide an opinion that you have fraudulently
attempted to get credit.
–
Credit
defaults can be lodged on any outstanding amounts over $150.
However, not
everyone is happy about the changes.
National manager
of Property Club, Troy Gunasekera, says additional information on credit
reports might go too far.
“Australians who
have missed bill payments in the past, even those less than one week late, may
be at a disadvantage when it comes to the loan approvals process, giving the
impression to lenders that they’re likely to miss payments on the due date in
the future,” he says.
“Although
consumers with a good credit history are more likely to be offered lower rates
of interest on home loans and credit cards, it’s worrying that consumers who
have experienced repayment difficulties in the past may be assessed as higher
risk and incur higher rates of interest as a result, making it even harder for
these consumers to stay on top of their financial obligations.”
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