As a property invetsor it’s worth understanding that Australia’s credit reporting system is in for a major shakeup next month that has the potential to affect your ability to get a loan.
The change involves the introduction of “comprehensive” credit reporting.
The new regulations will give lenders far more information about your credit history, allowing them to more closely scrutinise your credit worthiness and calculate the risk of you defaulting on a loan.
What sort of information will be available to lenders?
They will be able to view the last 24 months of your credit repayment history on all open credit accounts in your name – such as your mortgage payments and credit cards.
Lenders will also be able to see all of your past and current credit accounts and enquiries, meaning they will know how many credit accounts you have and when each account was opened and closed.
Obviously this type of information will be useful when determining your ability to take on additional debt.
How do the new regulations compare to the current arrangement?
Up till now lenders can only access a limited amount of information about your credit history, such as your recent credit applications, any major credit infringements or whether you wrote any cheques for $100 or more that have been dishonoured twice.[sam id=36 codes=’true’]
At present lenders can’t find out whether your previous applications were approved or declined or whether you actually pay your loans on time, just that the applications were submitted.
This will make it harder for some to get a loan
Clearly if lenders have more information about credit applicants then it will become harder for some people to obtain a loan, because if you have black spots in your credit history, it’s going to be nearly impossible to hide them.
But there any potential benefits to borrowers.
Of course if the new regulations allow lenders to better assess risk and minimise defaults, it could drive down the overall cost of credit.
Also lenders may start to offer discounts and incentives to borrowers with good credit histories.
All this extra information will give lenders a more comprehensive picture of people’s overall financial position, which could perhaps lead to the development of more tailored products.
Only time will tell how the new regulations will impact the marketplace.
But clearly it is even more important now to keep a clean credit history.
Make sure you pay your bills on time because a bit of carelessness could easily end up affecting your ability to get a loan in the future.
Also, it maybe you should check your own credit report, so you can resolve any issue before they become a serious problem. You can do this at My Credit File