Keeping a clean sheet

Credit Score Word Cloud

Recently, Australian credit reporting agencies are changing the way they report credit profiles so how do you avoid the pitfalls of a less than perfect credit score?

Credit agencies are now using the Comprehensive Credit Reporting (CCR) system which will change the way that lenders assess the credit-worthiness of a potential customer.

Historically, credit reporting was mainly focused on the negative aspects of a person’s credit history.

Under the new CCR system a greater level of information will be provided, on a more frequent basis, which according to credit providers, will provide a greater insight into someone’s ability to repay a loan.

As a result, this shift in reporting should reward positive credit behaviour and not just report bad credit behaviour.

Let’s take an example of James, a 28 year old who recently met with me for financial advice.

James has been married for two years and has one child. He and his wife had recently migrated to Australia but James had previously spent some time in the country living in a shared house.

Their joint household income was $180,000 and they had no other liabilities as they have recently paid off their car loan and interest free store facility.

James had purchased a house and had saved $50,000 which was a 10 per cent deposit.

When we applied for the loan we were amazed when the lender automatically declined the loan as it had been “credit score declined”.

Upon further investigation it turned out that James had a payment default with a telco company for $250 from four years earlier, and it had remained unpaid.

When James left the country he had paid the bill but the telco had inadvertently charged him for one more month.

It was only after paying $2,000 to a credit repair company, and eight weeks of emotional torture for James and his family, that he was able to re-apply for finance.

Let’s hope for James’s sake and others like him that the new reporting regime will reward his positive credit behaviour in paying off his car loan and store card and that lenders will no longer solely focus on negative, one off incidents.

credit_score (1)KEEPING YOUR CREDIT RATING HEALTHY
As Comprehensive Credit Reporting has now been launched in Australia, it is more important than ever that you keep you maintain a healthy credit report. Here are some tips to achieve this, courtesy of veda.com.au:

  • Pay bills and loans on time – consider setting up direct debits and have loan repayments scheduled for your pay day.
  • Keep track of your credit commitments – Only apply for credit if and when you need it
  • Having trouble meeting your repayments? – If you are in financial difficulty talk to your credit provider, they can likely assist you
  • Get your VedaScore and your credit report and check the information is correct. You can even monitor changes through Credit Alerts and help protect your identity.

About peardrealestate

Peard Real Estate is an award winning network of boutique offices throughout Western Australia delivering innovative property solutions, services and results for home owners, landlords and investors.
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