Buying a home? 5 things you need to know about Australia’s new credit reporting laws before you apply for finance.
Some major changes have occurred to Australia’s Privacy Laws, and home buyers need to know about them before they apply for finance. A consumer advocate for accurate credit reporting warns potential home buyers they need to get up to speed with some of the main changes to credit reporting which could see more people refused a home loan in the coming months and years ahead.
CEO of MyCRA Credit Rating Repair, Graham Doessel says some simple mistakes made with repayments now, could see people blacklisted from credit even before the Privacy Amendments (Enhancing Privacy Protection) Bill 2012’s March 2014 deadline for implementation.
“Potential home buyers need to know that from this point on, they need to make every credit repayment on time to avoid having late payment information show up on their credit history and potentially ruin their chances of getting the home they want,” Mr Doessel says.
Mr Doessel explains more about this change, and other factors in Australian credit reporting which impact your credit rating:
1. Repayment History Information
From December 2012, whether or not a credit account was paid on time will be part of your credit history and will be used when a lender is assessing your suitability for a home loan.
The notation will remain as part of your credit history for 2 years.
The Government intends for these reforms to decrease levels of over-indebtedness in the market.[i]
But Mr Doessel is worried it could push more borrowers into higher interest rate loans due to being refused credit with mainstream lenders.
“Many people pay bills late, for a variety of reasons – this doesn’t necessarily mean they intend for the account to go into default. But these late payers could find they end up refused credit, or charged thousands more in interest due to these notations,” he explains.
2. Types of credit
The new laws will now allow information on the type of credit accounts you have, and when they were opened and closed to be shown on your credit history. This will give lenders more ability to determine the relevance of each listed credit account for your specific situation.
3. Credit limit of each account.
The credit limit on each credit account will be used to assess the potential volume of credit the potential borrower could have access to.
But there will be no way of telling what level of debt you actually have only what you could potentially redraw to.
“It may be worth reducing unnecessary credit limits on your accounts before you make your application,” Mr Doessel says.
4. Beware excess credit enquiries.
Whenever a person other than you makes an enquiry on your credit history – that enquiry is recorded on your credit file.
Mr Doessel says some lenders will decline a finance application due to too many credit enquiries, such as two enquiries within thirty days or six within the year.
“By all means ask questions, and do your research on the best home loan for you, but when it comes to giving over your details, and making applications, leave that until you have decided which lender suits you best, to avoid being disadvantaged,” he says.
5. It will still be up to you to ensure your credit file is accurate.
With all of the new information available to lenders about your credit history, it is more important than ever for that information to be accurate.
You can apply for your credit report for free every year by making a request to Australia’s credit reporting agencies – Veda Advantage, Dun & Bradstreet and Tasmanian Collection Services (if in Tasmania).
“It is up to you to ensure your credit file reads accurately,” Mr Doessel says, “and the saving grace for this legislation is the improvements set to be implemented in 2014 around access and correction of your credit file.”
From March 2014, Creditors will be forced to justify disputed credit listings. Notably, your Creditor will have to substantiate the information they report on your credit file if you dispute it.
“This change is crucial, considering the power the Creditor has to impact your ability to obtain credit for years to come. Up till now, there has been little obligation within the legislation for the Creditor to justify credit listings, nor remove incorrect data,” Mr Doessel says.
If the dispute escalates, you can complain directly to the Creditor’s Ombudsman, and in some instances may have a right to remedy under the direction of the Privacy Commissioner.
“Finally there is some real incentive for Creditors to take due care with adding listings to credit files and we as credit repairers ultimately have a better avenue to help our clients remedy their credit rating errors,” Mr Doessel says.
Graham Doessel – PH 3124 7133
Lisa Brewster – Media Relations email@example.com
246 Stafford Rd, STAFFORD Qld. 4053
MyCRA Credit Rating Repair is Australia’s leader in credit rating repairs. We permanently remove defaults from credit files.
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