All About Credit Scores in Australia
For quite some time now, Australia has been having some issues in terms of credit scores. To be able to apply for loans, borrowers must have good credit score standing. The problem is, a lot of borrowers have no idea about their credit scores which leads to some problems with their ability to borrow money. It also turns out that even lenders are affected by this.
According to experts, because borrowers are unaware of their credit scores, lenders are also having difficulty with the very little information about it resulting in very confusing result. Some borrowers that can pay well or are called worthy borrowers are being restricted while those that are the opposite would get extended loans.
Fortunately, things were set to change. Last July 1, changes in terms of the information about credit scores will be made available to lenders. A comprehensive reporting about credit scores will be shared to help both lenders and borrowers become aware of their current standing. Back in 2014, only the negative credit events were disclosed and the positive ones were not shared. This affects the way loans were assessed. Last year, it became a requirement that the big banks should report 50 percent of their positive credit transactions including payment histories and the kind of credit the borrowers have. Negative credit events include late payments, bankruptcies, and judgments made by the court.
This new bank development has already been taking place in other countries such as the USA and the UK.
So what does the comprehensive reporting mean for borrowers and lenders?
Unlike in the past where little information is released, comprehensive reporting allows the lenders to make better judgments in terms of loan approvals for borrowers. According to experts, this reporting would also allow lenders to see positive repayment history. Because Australians were unaware of their credit scores, they also didn’t pay much attention to it, thus, making negotiations for their loan applications were not really happening. With more knowledge of it, they can negotiate better.
If there are pros, of course, there are also cons.
What does this mean for those with negative credit scores?
One of the negative effects of comprehensive credit reporting would be, those that are unable to establish that they are good credit risk would be disadvantaged greatly. Experts say that they are most likely going to experience higher credit charges.
Tommy Wu of IBISWorld adds, “There are always risks with having so much information but that’s the cost-benefit of getting everyone accesses to cheaper credit and making loans and borrowing more accessible.”