Looking closely at the new credit reporting system introduced in March this year leaves many people feeling a little overwhelmed.
But the first step to making any step forward, especially with your finances, is to get educated. If you missed part one, check it out here to get up to speed on the changes and what it means for you as an investor.
Having seen how the consequences of credit reporting adversely affects my clients, I feel that there should be greater control on what is placed on someone’s credit file before it’s registered. The onus should not be on borrowers’ to later prove that any one item shouldn’t be there.
You’re probably curious whether there is any good news? Yes! In fact, the great news is that there are lenders that don’t use credit scoring in conjunction with the credit report. I hope that this remains the case with the changes. These lenders look at the logic of the credit report history. For example an active investor could have multiple enquiries if they were restructuring a loan as well as completing two purchases – this isn’t necessarily a bad thing.
The other lenders that rely heavily on the scoring actually lose the opportunity to build relationships with strong clients. Now, you may assume that lenders that use the basic credit fundamentals instead of credit score systems are second-rate lenders, though they’re certainly not, nor do they charge higher rates. In fact in some cases, their products are often better and we need to start rewarding these lenders with our business, and reduce the market share of the big four.
It’s extremely important that every person understands what credit suitability means and manage their own accordingly. You want to do this before you apply for a loan to avoid any nasty surprises during the application process.