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VEDA to change credit reporting

From March 2014 VEDA is introducing new credit reporting allowing licenced credit providers greater access to your credit behaviour and Repayment History Information. Troy Gunasekera, National Manager of The Property Club discusses how the new laws have the potential to prevent your clients from securing a home loan and advice for people wishing to enter the property market.

Troy Gunasekera, National Manager of The Property Club, Australia’s largest independent property group cautions anyone who often forgets to pay consumer bills that come March 2014 banks and non-bank lenders will have access to more financial information about you than ever before.

“Anyone wanting to apply for a home loan should already be aware that when it comes to borrowing hundreds of thousands of dollars banks do not look favourably on a poor credit record, and it’s about to get even trickier with big brother looking over your shoulder for even the most minor of misdemeanours.

Licensed credit providers will soon be able to interrogate a lot more detailed information about your credit behaviour via reviewing your Repayment History Information, which is why you must ensure your credit record is spotless. It could be the difference between securing a home loan and being turned down,” Troy said.

The changes which are being introduced by VEDA will also introduce positive credit reporting in Australia. Currently VEDA limits data collection to negative reporting, listing only credit applications and defaults on an individual’s file. From March next year, the data collected will profile a more comprehensive picture of an individual’s financial situation and instances of good credit conduct will be included. VEDA will showcase this information in a credit score capped at 1200 points.

Troy said: “In the UK positive credit reporting has led to increased benefits to mortgagees with good credit conduct. Lenders not only tended to make more favourable decisions, they rewarded customers with marginally lower home loan rates,” continued Troy.

While credit reporting agencies began collecting Repayment History Information (RHI) in 2012, lending institutions won’t have access to the new information until March year. So follow the tips below in the next few months to improve your credit profile.

How to improve your credit score and limit the impact of the new rules:

  • Ensure you pay all your accounts on time, or before time when you can
  • Do not treat unsecured credit e.g. credit cards, personal loans and store cards any less diligently as all credit may be tracked and reported on your record
  • Obtain your personal credit report from VEDA at least once a year so you’re aware of what’s held on your file. You can access your credit file for free at www.mycreditfile.com.au/home/free-credit-file.dot
  • Don’t apply for multiple credit products at the same time, do your research diligently and make the least number of applications
  • Keep your contact details, such as home addresses up to date with VEDA and financial institutions

New credit information to be reported:

  • RHI will identify when a bill was due, and if it was paid late, the date it was paid*
  • Making a partial payment on a contracted amount due may be treated as a missed payment**
  • The type of credit you apply for, the date the contract is entered into and terminated, the amount of credit and the terms and conditions will all be tracked
  • Only credit defaults of $150 or more will be recorded.
Notes:
*Repayment history information can only be supplied (and accessed) by Australian Credit Licence holders – or by an organisation that is considering providing mortgage insurance for a home loan you have applied for – this doesn’t include telco and utilities companies.
 
**This is still being finalised in terms of how industry / regulator will treat and will likely be based on:
  • The amount due and whether that amount due is paid in full. This means making the minimum monthly payment on a credit card would be treated as paid, as against the full balance
  • There is likely to be a standard number of days grace period applied to missing a payment – so if the due date is missed but paid within a grace period it will be regarded as paid.
For further information on your Veda score, please visit http://www.veda.com.au/yourcreditandidentity/vedascore

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