Comprehensive Credit Reporting sounds pretty boring, but it’s worth knowing about. It could have a big impact on your personal finances, including:
- Impacting the interest rate you’re charged when you next take out a loan.
- Your ability to get a loan or credit card.
- If you are able to refinance from a high interest rate to a lower rate and save money.
- Difficulty in refinancing or getting another loan in the future if you are not paying your current loans or credit cards on time.
Comprehensive Credit Reporting involves these things called Credit Bureaus. Credit Bureaus are companies that capture credit information from lenders and in return use the data to provide lenders with Credit Scores on each applicant. A low credit score (e.g. -200 to 450) is bad and a high credit score (e.g 550 to 1200) is good. These Credit Scores give lenders an indication of your likelihood of repaying the debt.
This then becomes a key factor in your chance of obtaining a loan. Until recently, credit bureaus only captured “negative” data for their assessment of your likelihood to repay. Negative data could include if you have defaulted before or applied for credit too often. One of the only real ways to fix it was time – a long history of no defaults. This meant accidentally applying for a payday lender or getting too trigger happy when shopping for a good deal on a loan, could quickly put you in a position where a bank wouldn’t lend to you. This is because each enquiry would lower your credit score.
Enter Comprehensive Credit Reporting
An increasing number of lenders are now reporting to the Credit Bureaus your current repayment performance on your existing loans and credit cards. So what?
Well this means that if you’re doing the right thing and paying your debts on time your score goes up! This means that you may be able to negotiate a lower rate on your loans, or access more credit if you need it. It should also be a warning to those that are falling behind on their payments. It will become increasingly more difficult to access cheap credit if you aren’t managing your finances well.
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Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.