How Does Comprehensive Credit Reporting Affect My Mortgage Application
While this may sound like a very boring headline and a possible snore-fest, but the implications of the new Comprehensive Credit Reporting regime on everyday Australians are quite far-reaching. In the few months that it has stepped up a gear, I am noticing far more issues being picked up in loan applications to lenders.
Comprehensive Credit Reporting has been around since the 2nd of November 2017. It has been in the workings and development for a lot longer than that. From a lending perspective, though, the role of CCR as we will call, it has become more and more instrumental in the process of having your mortgage approved. From the end of 2019, CCR has stepped up another notch, and we are starting to see the effects of it come through on loan approval decisions. In light of that, this article will highlight what changes mean for clients applying for a loan now as well as moving forward.
Looking back to 2017 when Comprehensive Credit Reporting was mandated. If you were to put a loan in with the banks shortly after that, and you omitted a debt, like a credit card, for instance. What would usually happen is the lender would do a check on your credit file that would tell them you have a Visa credit card. At best, the lender would come back to the broker or client and ask for a statement from that credit card and an explanation as to why you failed to disclose it. At worst, the loan would be declined on failure to disclose your liabilities. Back then, the lender who would be assessing your loan would not normally have information as to what the credit limit was on the card was, just that the client had the card. Potential loan candidates who were doing the wrong thing and attempting to understate their liabilities could often get away with this by saying they did have a credit card with bank x. Instead of saying it had a limit of $15000.00, they might say it was $2000.00. Essentially this meant that without further checks and balances, clients could understate their liabilities and get a loan that was essentially too big for them to handle (not to mention breaking the law).
What has been happening in the interim between then and now is that lenders have had to slowly increase the amount of information that they share with credit reporting authorities. Moving forward now to November 2019 was another step up for lenders as to the type and amount of data that they need to share. Essentially now, when you put a loan application in, the incoming lender can see the loan amount applied for your limit as well as your loan repayment conduct over the last two years. While this is a welcome progression and helps to weed out misconduct from clients and intermediaries, it may have unintended consequences. What I have noticed over the last few months is that quite a few loans have come back with lenders querying undisclosed debts. On quizzing my clients, I am finding now that the undisclosed debts are genuinely being forgotten because it may be an old store account that they opened ten years ago and never used. Due to CCR being a lot more comprehensive, things like this are being picked up. So far, due to the change in CCR being recent lenders have been accepting of the odd mistake, I am sure this will change soon, though. It may mean that you miss out on loan because of a credit card you received long ago and never used. My advice to all looking at getting a loan now would be to have a hard think on all the possible liabilities you may have, or better yet get a credit report done on your self. A simple check like this could help trim unnecessary debts or credit limits and will put you in a strong position for a loan.
A good mortgage broker should be able to assist you in helping jog your memory with regards to liabilities so that you don’t miss any. A Mortgage Broker In Adelaide like, Castle Mortgages, should be across all the latest trends of liabilities that are forgotten, like Zipay and After pay accounts. They should be able to help you make your best representation to your lender of choice. Castle Mortgages is a Mortgage broking firm in Adelaide that will help you navigate the finance application process. We will make it easy and at the same time, make sure that you are staying compliant in an ever-increasing world of red tape. If you would like to have a chat about your specific scenario and what options are available to you, get in touch today.