A good credit score is your Golden Ticket to better borrowing rates and, potentially, the house of your dreams.
Comprehensive credit reporting (CCR) has existed since 2014 but the big financial institutions had not shared more than 1% of the data required. In July 2018, the big banks, who hold over 80% of our accounts, were compelled to share 50% of the required data and will need to get to 100% by 1 July 2019.
Before CCR existed, credit reporting was only focused on negative aspects of your credit behaviour; late payments, court judgements, bankruptcies, etc. Your credit score at the time would have been more like a traffic light, red, amber, green, or more like “Computer says no”, “maybe” or “yes”.
CCR, also known as positive credit reporting, takes into account your credit behaviour when calculating your score. The main credit reference agencies are Illion (formerly Dunn & Bradstreet), Equifax (formerly Veda) and Experian. They now calculate scores on scales between 0 and 1000 or 1200. The score predicts the likelihood of you missing payments or having an “adverse event” in the next 12 months.
Your score is calculated using a number of variables including your age, where you live, the type of credit providers you use (banks, telecoms providers, utilities), when those accounts were opened and closed, the amount you have borrowed or the credit limit, the number of recent credit applications, any overdue or unpaid credit, any insolvency or bankruptcy arrangements, and your repayment history over the past 24 months. Importantly all of this information is also listed on the report itself. This means that if you disagree you can have it rectified. It also means that while one accidentally missed payment in the past would have affected your credit rating you can now show a prospective lender that you’ve made all the other 23 payments on that facility and on your credit card.
So what now? First, you need to find out what is actually on your report. Your report is free at;
- Equifax - https://www.equifax.com.au
- Illion - https://www.creditsimple.com.au
- Experian - http://www.experian.com.au/consumer-reports
It is worth checking all three to start with as they are all slightly different and it is possible for one to hold information that others don’t.
Next check your report for any old accounts that you thought you’d closed but are still hanging around. Check for accounts that you don’t recognise too, identity fraud may show up here too. Check your payment record. Do a little spring clean of your finances. Close down any unused or unwanted accounts, make sure all of your credit providers have your current address. Get in touch with the agencies to correct any errors.
The important thing to remember is that your payment history is a huge part in all of this. Consider setting up direct debits for credit cards or any other payment that is easy to forget (mobile phone, internet, electricity). The more that you can show that you are a good payer and a good risk the better your score will be.
So what?! I hear you cry. Well now that all of this information is available to lenders they could offer better interest rates to lower risk borrowers. In the US and the UK, this type of credit report has been available for many years and it is not unusual to negotiate rates armed with your glowing credit report.
Using your Comprehensive Credit Report Preston Finance & Insurance can help you find the most competitive available rate for your home loan. Call us now on 07 4052 0750 for a free, no-obligation consultation today.