Comprehensive Credit Scoring – The Good Story
From July 1st 2018 the Federal Government mandated ‘positive’ (CCR) Comprehensive Credit Reporting . It might seem odd that I’m revisiting this (2) years after it was introduced but it is worthwhile reminding mortgage holders of the value of this deeper credit reporting system. For a more lengthy overview people can visit the following website https://www.canstar.com.au/credit-score/what-is-positive-credit-reporting/ but basically the word positive holds the key.
Prior to July 2018 a person’s credit file could be seen to be skewed to the negative in that they reflected credit enquiries, loan applications , defaults on debt and utility (phones & electricity) commitments , bankruptcy etc. When assessing loans , lenders first task was to check a borrower’s credit file and if that simply reflected any negative history or multiple recent enquiries, it augured poorly for a successful or even balanced chance of a loan approval. It could be said that the information available on any file was thin in content. However, now CCR is deeper and more comprehensive because data on how people are presently conducting their commitments and accounts is ‘current’ . If their last (12) months to (2) years behaviour has been positive in this sense, then that is reflected in a stronger CCR scoring position. In other words lenders can see this positive behaviour and consider client’s creditworthiness in a more just manner. You would reasonably expect that the deeper and more comprehensive the data , the more fair the running CCR file of the client. An example of how this supports borrowers in the future is for those that are seen as ‘mortgage prisoners’ . This is a terminology penned to describe borrowers that are trapped with lenders on higher interest rates and fee structures but cannot refinance or restructure their mortgage because of an historical blemish or say a change in material financial circumstances . Noting that it would be of great benefit for them to ease their cash flow by refinancing the mortgage. Let us assume they have met all their liability commitments on or before the due date and have displayed impeccable behaviour in the last (12) months to (2) years. This deeper CCR system then allows lenders to place a stronger weighting as it were on the clients ability to meet their ongoing payments . The lenders are still acting in accordance with responsible lending guidelines and in fact are probably being more diligent in that respect.
The upshot of the above is that any borrowers that are feeling trapped in their current mortgage circumstances should not simply dismiss it as an impossibility to refinance their home loans to a lower rate. CCR is certainly something that will support borrowers in managing their debt restructure.
As a borrower you may be in the above position or know someone that is. If so call Michael to book an appointment to discuss. 0265832211