Do you know what your credit score is? Understanding your credit rating can help you when applying for a loan.
With an ever changing credit environment - knowing how your own file works has never been more important. Previously our credit reporting agencies such as VEDA only displayed negative data which can include things like defaults (black marks), bankruptcies and high enquiries. However, all that is slowly changing, and starting from the 1st of November the top 4 banks have agreed to open their books and report not only on the negative but positive conduct as well.
This has a two-fold effect on the industry and can be seen as a double edged sword:
Firstly, being that those who previously had defaults or poor credit scores due to high enquires and so forth, but have taken loans out with a 2nd or even 3rd tier lender at presumably a “higher rate” because they are considered to be a higher risk client, will now have a real time effect on the credit score as they maintain their payments; whereas previously – although certain lenders would look at loans after the defaults as a type of “restored credit”, the credit agencies (Veda) never updated the consumers credit scores to reflect until the defaults fell off the credit file (5-7 years later). This made it very hard for the clients to ever get a loan with a tier 1 lender such as a major bank even when you have proven yourself maintaining higher payments without missing a beat, which was very frustrating for both brokers and consumers alike.
Secondly, since the banks now are disclosing all information, good or bad – clients that haven’t necessarily defaulted on a loan or credit card, but have had a few late payments (over 30 days) and have been kept up to date with being under the limit, will now also reflect poorly on the credit file; whereas previously your Veda score would be untouched unless the bank or creditor actually defaulted you, which was a rigorous process and something that wouldn’t likely happen for anyone that is merely a few payments late on a credit card.
It will be interesting to review the data once it’s all in motion to see if there are more clients who will be effected poorly with the new reporting due to their tardiness with payments, or if we will see an increase in good credit clients due to having an old blemish on their credit file but having maintained good history on a higher loan and raising them back to tier 1 lender criteria.
Being that knowledge is the key to your own credit worthiness – here are a few tips I would suggest to stay ahead of the curve:
All in all, it’s an exciting time for the finance industry and I look forward to seeing how everything unfolds with the new changes in the next 12-24 months. As it is our mission at 1800Approved to hold the customer at the heart of everything we do, we ensure to take the time and educate our customers on understanding their own credit worthiness and any changes happening in the industry with the goal to see fairer opportunities for all the consumers seeking finance in the future.
Topics: credit score