ABOUT YOUR CREDIT FILE
CHECK FOR THE GOOD AND BAD IN YOUR CREDIT FILES
Your credit file holds information relating to your credit history – all of the naughty and nice details! If you have ever applied for credit or a loan, you’re likely to have a credit file held by a credit reporting agency, such as Veda.
Your credit file is one of your most valuable assets, recording details of some of your dealings with credit providers. It includes information that may be used by lenders as part of the credit assessment process, such as previous applications you’ve made, names of lenders currently providing credit to you, and any details of overdue debts.
Your file includes personal identification information, as well as credit-related information, inclusive of consumer credit details, business or commercial credit details, and public-record information. .
Credit providers outline (in their terms and conditions) the circumstances under which they will be prompted to access your credit file. Depending on what part of your credit file they wish to access, they’ll either advise you of their intention to access your file or obtain your consent in advance.
So what happens when I have applied for loans at a few places?
This is not a position you want to be in. If you have been on time with all your past payments you’ve always paid your bills, unfortunately this counts for nothing when you have been shopping around for finance and apply to a new financier for a better deal.
Banks, and other lending institutions have credit policies. Credit policies are the rules they have which determine what type of borrower they should lend to, for how much, for what reason, and for what type of security, and other details reducing the lenders risk to a potential bad debt.
In Australia, lending institutions rely almost entirely on your credit file.
A sample credit file is shown here thanks to:
As you can see, the sample even explains that you are only recorded as having APPLIED for finance. No record is mentioned as to whether you took up that application, or you were declined finance.
The worst part? The lender doesn’t give you the benefit of the doubt. The fact remains, you shopped around for finance, and as such you shopped around, you did not obtain finance, meaning the lender did not fund you.
The lender has the power to do this, and in this case, might is right, and the lender is mighty.
How unfair is that? You’ve been rejected for a loan because you were shopping around. You shopped around because your broker’s or lender’s valuer gave your property a valuation that didn’t suit your purchase price.
Did you know that the number of valuation companies in Australia that services the banks and lending institutions is shrinking? That’s right. There are less valuation companies operating than there were a few years ago. It’s going to keep going that way, where only a handful will remain and they will be in partnership with the banks, rendering you in a position of no power. So no matter which bank you go to, it’s likely you’ll get the same valuer or at least the same company. Would you really want to be sabotaged by the same valuer through what you think is a different lender?
Now, no lender would offer you any type of approval because of this reason alone, despite your steady job, good savings record and financial position. It’s likely that for the next 6 months you cannot even apply for a loan. The more you apply within that period, the more it will take for you to get an approval. If you’re lucky enough to find a lender who will approve you, or a broker who will fight hard enough for you, you’ll be paying extortion level interest rates for a loan, that you could have got cheaper had you not simply “shopped around”.
Do you feel ripped off yet?
THE KEY MESSAGE - Before you go put a deposit on your next home, or want to refinance, or snap up that great investment or development site, think about your situation. Wouldn’t you like to know that an experienced professional can help alleviate this problem by providing you with an insight as to what your property is worth, without leaving the negative credit rating on your file?