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Lenders are now looking closer at your character - what you need to know
Comprehensive Credit Reporting (CCR) is now in full swing, giving lenders a closer look into your financial character and highlights that you may not have disclosed in your application. The CCR shows the lender if a credit facility is open or closed, the credit limit and repayment history information on a monthly basis. So, it's really important to talk to your broker about your facilities, even the ones that you may not have used for a long time.
What you need to know:
1. Be cautious of applying for credit. Every time you apply for credit, this is reported, and affects your credit score. So, shopping around and applying for credit cards is not advisable. If a credit card provider declines your application for a credit card, it's nSot advisable to apply to other providers hoping for a different outcome.
2. Your credit report shows if the maximum payment on your credit facilities has been made on time (or with a 14-day grace period) - and if not, how late the payment was for that month. Only licensed credit providers can share and receive this information, so at the moment this does not include telco and utility.
3. Repayment history is recorded monthly and held on your credit file for 2 years.
4. A default can only be recorded on your report if you miss a payment which is more than $150 and is more than 60days overdue. Before listing the default, the credit provider must have taken steps to collect the whole or part of the outstanding debt. This means thay have sent you a written nottice setting out the amount overdue and seeking payment and a seperate written notice advising you the debt may be reported to a credit reporting body.
5. A default remains on your credit report for 5 years.
6.Paying your bills on time and avoiding getting a default on your credit report are positive impacts on your credit rating or Equifax Score.
7. A number of late payments could be an indication you are in financial stress and may negatively impact your credit report.
8. If you are concerned about late payments, defaults or past poor history (including bankruptcies), discuss this with your broker.
If you want to get a copy of your credit report, you can create a myEquifax account to get two free Equifax credit reports each year by going to https://my.equifax.com/consumer-registration/UCSC/#/personal-info
CREDIT REPORT SAMPLE: As you can see, comprehensive credit reporting does play a big part in the lender's decision, and credit reporting would also have algorithms to pick up and score a customer's financial character based on that information.
The Customer Credit Reporting highlights non-disclosure. Here is a sample of what a credit report looks like:
CLICK HERE FOR CREDIT REPORT SAMPLE
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I often get ask about Pre-Approval home loans and this is basically how it works and the steps involved.
Step 1 Mortgage Pre-Approval
The lender reviews your financial situation to determine how much they are willing to lend.
Step 2 House Hunting & Offer
The home buyer locates a home, negotiates the price, and signs a purchase agreement.
With normally 21 days for finance building and pest inspection. You may have a pre – approval but the lender has to look at your application based on that property and the valuation has to be done.
Step 3 Loan Application
The borrower completes a loan application with information about the home being purchased.
Step 4 Mortgage Processing
The lender gathers all of the information needed for the loan and starts work on the file based on the property on the contract of sale.
Step 5 Mortgage Insurance
If the loan requires mortgage insurance the file then goes to the Mortgage Insurer to determine if it should be approved or denied.
Step 6 Approval & Settlement
The mortgage insurer issues their approval, and the Lender then issues their Formal approval. Documents are issued, signed, returned to the lender ready for settlement.