Comprehensive credit reporting is about to reach critical mass

Comprehensive credit reporting is about to reach critical mass

The future has arrived. And borrowing money will never be the same again.

As of 1 July 2019, Australia’s big four banks will start fully implementing a system known as ‘comprehensive credit reporting’.

So what is comprehensive credit reporting?

Comprehensive credit reporting means that when credit providers supply credit bureaus with information about how their customers are managing loans, they supply both ‘positive’ and ‘negative’ information.

What are credit bureaus?

Credit bureaus, also known as credit reporting agencies, are companies that collect and analyse data about how Australians manage loans. The three main credit bureaus are Equifax, Experian and Illion.

In the past, banks and other credit providers supplied only negative information – such as when customers missed repayments or defaulted on their loans.

But as of March 2014, credit providers have also been able to supply positive information – such as when customers make repayments on time and pay off their loans.

Comprehensive credit reporting is regarded as a more accurate system, because it paints a more detailed picture of how Australians manage loans. It also gives people the chance to balance out one negative event (such as accidentally forgetting to pay a bill) with lots of positive actions (such as paying lots of bills on time).

What are credit providers?

Credit providers are companies that provide credit (or loans). The main ones are banks, credit unions and building societies. But telcos, internet providers and power companies are also credit providers, because they let consumers buy now and pay later.

What’s changing?

Wait, so if comprehensive credit reporting started in March 2014, what’s changing as of 1 July 2019?

Well, even though comprehensive credit reporting started five years ago, it wasn’t mandatory. 

In other words, a lot of credit providers – including the big four banks – weren’t supplying credit bureaus with positive information.

Australia’s big four banks provide about 80 per cent of loans, so their support is crucial to the success of any new finance initiative.

That’s why, as of 1 July 2018, the major banks received a 90-day deadline to start supplying both positive and negative information on 50 per cent of all eligible accounts.

And now, as of 1 July 2019, the major banks have 90 days to start supplying that information on 100 per cent of all eligible accounts.

Once that happens, the comprehensive credit reporting system will reach critical mass.

Why your credit score might change

When you apply for a mortgage or a credit card or an electricity account, the provider does a background check to assess how likely you are to repay any money they might lend you.

As part of this background check, the credit provider will often ask a credit bureau for a copy of your credit file.

In the past, these credit files contained only negative information, so they provided only a limited insight into your ability to manage loans. Now, these credit files will include positive information as well, which means they’ll provide a more accurate assessment of your credit history.

Once banks and other credit providers start supplying extra data to credit bureaus, your credit score might change, for better or worse.

  • If your credit score goes up – credit providers will be more likely to extend you credit and give you better deals
  • If your credit score goes down – credit providers will be less likely to extend you credit and give you better deals

A credit score is a number that represents your credit-worthiness. A high number means you’ve done a good job of managing loans in the past, while a low number suggests room for improvement.

Good borrowers have been paying too much interest

The government believes this new comprehensive credit reporting system will benefit many Australians.

Back in March 2018, when the government introduced the relevant legislation to the parliament, Michael Sukkar, who was then assistant minister to the treasurer, said a shortage of data was undermining the credit system.

“It means that more loans are declined by lenders who simply cannot verify a customer’s creditworthiness,” he told the parliament.

“And it means that many loans are mispriced, leaving borrowers with good credit histories paying higher interest rates than they otherwise would.”

Mr Sukkar pointed out that Australians who had a thin credit file or a single default against their name were disadvantaged by the negative-only system.

However, the addition of positive reporting would give those people “a better chance to build and repair their credit history” before applying for a loan.

“Small-business owners, entrepreneurs and sole traders will be empowered to borrow to build their businesses on the basis of strong consumer credit histories,” he added.

Australia has a credit reporting problem

Michael Sukkar, in his March 2018 speech, described Australia as an “international laggard” in credit reporting.

“Many of our largest trading partners – including the United States of America, the UK, New Zealand and Japan – have well-established comprehensive credit reporting systems,” he said.

“On this matter, we are falling behind even developing economies such as South Africa and India.

“But movement forward in Australia has been stymied by the lack of a ‘critical mass’ of credit reporting data.

“There is a critical first mover problem at play here – without sufficient data in the comprehensive credit reporting system, there is very little benefit for any individual credit provider to invest the time and capital required in building systems and arrangements to access it.”

More data equals more competition

Mr Sukkar said the new comprehensive credit reporting system would also improve market competition.

The theory is that new players and small companies will find it easier to compete with big, established rivals if they have access to rich data sets.

“Small credit providers, including innovative fintech firms and new entrants, will be better able to serve customers and assess the lending capacity of potential borrowers,” he said.

“Placing smaller lenders on a more level playing field with the major banks, in respect of access to credit information, will drive competition in the consumer lending market. 

“Greater competition in the lending market should benefit consumers, by being offered greater access to finance and better pricing.”

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What is a credit file?

A comprehensive summary of your credit history from an authorised credit reporting agency.

It includes your credit details, credit taken in the last five years, any default payments or credit infringements, arrears, repayment history, bankruptcy filings and a list of credit applications (including unapproved credit applications) in addition to your personal details.

Does Westpac offer loan maternity leave options?

Having a baby or planning for one can bring about a lot of changes in your life, including to the hip pocket. You may need to re-do the budget to make sure you can afford the upcoming expenses, especially if one partner is taking parental leave to look after the little one. 

Some families find it difficult to meet their home loan repayment obligations during this period. Flexible options, such as the Westpac home loan maternity leave offerings, have been put together to help reduce the pressure of repayments during parental leave.

Westpac offers a couple of choices, depending on your circumstances:

  • Parental Leave Mortgage Repayment Reduction: You could get your home loan repayments reduced for up to 12 months for home loans with a term longer than a year. 
  • Mortgage Repayment Pause: You can pause repayments while on maternity leave, provided you’ve made additional repayments earlier.

When applying for a home loan while pregnant, Westpac has said it will recognise paid maternity leave and back-to-work salaries. All you need is a letter from your employer verifying your return-to-work date and the nature of your employment. Your partner’s income, government entitlements, savings and investments will may help your application.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

How do I get a pre-approved home loan with Aussie?

Getting Aussie home loan pre-approval means receiving conditional support from Aussie Home Loans to borrow the money you need to buy a home. 

It’s an indication of the approximate amount Aussie may offer you, subject to some terms and conditions. Keep in mind, having a pre-approved home loan does not guarantee an actual approval of your loan when it comes time to buy.

Aussie home loan pre-approval often involves speaking to one of the lender’s brokers. You can make an appointment online. You’ll often have to submit your personal details and other information about your assets, income, liabilities and expenses.  It’s worth remembering that a pre-approved loan is usually valid for a few months.

Why should I get an ING home loan pre-approval?

When you apply for an ING home loan pre-approval, you might be required to provide proof of employment and income, savings, as well as details on any on-going debts. The lender could also make a credit enquiry against your name. If you’re pre-approved, you will know how much money ING is willing to lend you. 

Please note, however, that a pre-approval is nothing more than an idea of your ability to borrow funds and is not the final approval. You should receive the home loan approval  only after finalising the property and submitting a formal loan application to the lender, ING. Additionally, a pre-approval does not stay valid indefinitely, since your financial circumstances and the home loan market could change overnight.

 

 

Can I get a NAB home loan on casual employment?

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

How do I get a Suncorp home loan pre-approval?

Getting home loan pre-approval helps you work out a budget to help you search for a suitable property and make an offer with confidence. Once you put in an application, you should get your pre-approval outcome within two business days. To help get a fast turnaround time of your pre-approval application, ensure all the information and documentation that Suncorp requires. This includes proof of identification, recent payslips, bank account and credit card statements.

You can submit the home loan pre-approval application online. You’ll be asked for information about your income, expenses, assets, and debts. It should take you about 10 minutes to fill out the application, and you can do it free of charge. A Suncorp lending specialist will review your application and contact you within 24 hours or the next working day. Suncorp will not run a credit check until you have heard from this lending specialist.

Once you get Suncorp home loan pre-approval, it’s valid for 90 days. If you don’t find a property you wish to buy in this time you may be able to apply for an extension, speak to your Suncorp lending specialist about this.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

Does UBank offer home loan pre-approvals?

If you’re applying for a home loan with UBank, you can first get an approval in principle. You’ll need to provide information about your job and earnings, your household expenses, the assets you own and the debts you owe. 

UBank will assign a home loan specialist to discuss these details over a phone call, which can take about 30 minutes. 

The bank will then confirm if you’ve received in-principle approval for your home loan. Depending on how you submit your documents, this could take a few days or a few weeks. If successful, the approval will be valid for 60 days. 

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

How long does Bankwest take to approve home loans?

Full approval for a home loan usually involves a property valuation, which, Bankwest suggests, can take “a week or two”. As a result, getting your home loan approved may take longer. However, you may get full approval within this time if you applied for and received conditional approval, sometimes called a pre-approval, from Bankwest before finalising the home you want to buy.  

Another way of speeding up approvals can be by completing, signing, and submitting your home loan application digitally. Essentially, you give the bank or your mortgage broker a copy of your home’s sale contract and then complete the rest of the steps online. Bankwest has claimed this cuts the approval time to less than four days, although this may only happen if your income and credit history can be verified easily, or if your home’s valuation doesn’t take time.

How do you qualify for a CBA home loan with casual employment?

Qualifying for a home loan without a full-time job may be challenging, but it can be done. The first step is to understand how a CBA home loan is assessed when you have casual employment.

Most lenders will assess your expenses and savings while checking your loan eligibility, checking on factors crucial to home loan approval, such as if your bills are paid on time and what your credit score presently looks like. 

Your income can be one of the most critical factors to determine your final approved home loan amount. As such, you’ll need to provide payslip copies to lenders to assist them in assessing your income during the loan tenure, regardless of your employment status, full-time, part-time, or otherwise.

Casual employees will want to be casually employed for at least 12 months to be eligible for a home loan. Alternatively, you want to have worked as a permanent casual worker (working for a fixed number of hours per week) for at least one month, or you should have been in your current job for a minimum of three months (if the hours are irregular) to be eligible for the loan.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Can I apply for an ANZ non-resident home loan? 

You may be eligible to apply for an ANZ non-resident home loan only if you meet the following two conditions:

  1. You hold a Temporary Skill Shortage (TSS) visa or its predecessor, the Temporary Skilled Work (subclass 457) visa.
  2. Your job is included in the Australian government’s Medium and Long Term Strategic Skills List. 

However, non-resident home loan applications may need Foreign Investment Review Board (FIRB) approval in addition to meeting ANZ’s Mortgage Credit Requirements. Also, they may not be eligible for loans that require paying for Lender’s Mortgage Insurance (LMI). As a result, you may not be able to borrow more than 80 per cent of your home’s value. However, you can apply as a co-borrower with your spouse if they are a citizen of either Australia or New Zealand, or are a permanent resident.