Getting a loan may become more complicated under new credit policies being developed and it may not just apply to those with a bad credit.
Banks are being forced to join the new comprehensive credit reporting regime which could revolutionise whether or not a potential borrower is considered a risky applicant or not. Until recently the credit agencies only held negative information, including bankruptcies, defaults, legal judgments and missed payments of more than two months. Until recently Big Banks did not have to provide much comprehensive data.
Now that the banks are being required to join the comprehensive reporting regime, more data are required such as credit limits, monthly payment histories on credit cards, and loans with missed payments. This means you need to know your credit score and make sure your payments are up-to-date. If you take out a credit card you don’t need or are slow to make repayments this could have a big impact on a loan application when you really do need the money.
By 2019, the big banks will be required to submit all of their credit data. And we could see this revolutionise mortgages where loans are “priced-for-risk”; the better your credit history, the better your rate.
In the US and UK, this type of scheme has led to a 50% increase in interest rates for those with chequered credit histories.
But there is also some great news from this as Treasurer Scott Morrison wants new entrants and small lenders to be able to compete against our Big Banks. Comprehensive credit reporting levels the playing field for small, innovative lenders as they can assess borrowing capacity through the comprehensive data and offer innovative products. This could be a game changer for Australian consumers with greater competition and better access to finance for small businesses and households.
How do you think this will affect you?
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