New credit score rules could help you buy a house
Australians applying for a new credit card, loan or mortgage will now be assessed on how well they have repaid their credit accounts in the past two years, after the federal government moved to fast-track greater data sharing among banks.
The new data regime is expected to help recognise borrowers with a strong track-record of making timely repayments, and will assist others to avoid entering into unmanageable levels of debt.
But despite the significant impact on borrowers, research by Australian credit bureau Experian suggests two thirds of Australians are unaware of the changes.
So what does the introduction of new data mean for Australian's applying for credit?
1.? Your next application may be assessed differently with lenders now able to see how well a borrower has paid back credit over the previous 24 months. This will include historical data coming online from credit cards, mortgages and personal loans.
2.? Aussie borrowers are likely to see their credit scores increase or decrease in the coming weeks and months, as new data about how many credit accounts they have open and how much the combined credit limits they have is factored into their scores for the first time.
3.? Industry research suggests the changes will affect about 40% of applications in terms of approval, interest rate and lending limit.
4.? Overall approval rates from banks are tipped to increase by 10-15% with research showing the share of bad loans could fall by as much as 45% when positive data is included in lending decisions.
What should borrowers do?
1.? Always try pay bills on time to help protect your credit score. Paying bills significantly late or regularly late can negatively impact your credit rating.
2.? Check your credit report regularly. Your score can change over time.
3.? Limit your applications. Every time you apply for credit, be it a card or a loan, it shows up on your credit report and knocks a few points off your credit score.?
Suzanne Steele, managing director of Experian in Australia and New Zealand, says the changes could benefit consumers.
"Positive data may help potential first home buyers who don't have a long credit history, to be approved for finance, where previously they may have been declined," she says.
"Positive data sharing may also enable Australians with a stronger credit history to access more competitive deals and interest rates and will assist others to avoid entering into unmanageable levels of debt."