Consumers have been urged to move their mortgage away from the ’big four’ banks as a response to the raising of home loan rates this month, despite record profits. But any home owner looking to refinance needs to consider they could have a surprise bad credit history. It is important for them to check their credit history prior to making any finance application, even if they think their repayments have always been met on time.
By Graham Doessel, founder and CEO of MyCRA Credit Repairs and www.fixmybadcredit.com.au.
This month all four of the big banks – ANZ, Commonwealth, Westpac and NAB – raised their interest rates despite the Reserve Bank of Australia keeping the official rate on hold.
Consumer watchdog ‘Choice’ launched a campaign ‘Move your Money’ recently, urging Australians to change from the big four banks to save money and drive competition.
“The CHOICE Move Your Money campaign is about consumers standing up and saying ‘enough is enough’, sending the big four bank CEOs a message in a language they understand,” says Christopher Zinn, CHOICE director of campaigns and communications.
“The major banks rely on perceptions that switching is too much hassle or that there are no better deals out there. But experience shows that consumers can save by also ‘thinking small’, and moving your money is now easier than before,” says Mr Zinn.
But rushing in to refinancing may not be sensible for everyone in today’s market.
Home owners need to calculate the in and out fees that may be present on any new loan prior to making the switch.
Also prior to making a re-financing application, home owners should check their credit file, as their credit history could contain inconsistencies they aren’t aware of.
Regardless of whether people have been diligent payers, creditors can and do sometimes make mistakes with credit files and they can end up with black marks against their name that just shouldn’t be there.
Sometimes people don’t know their good name is compromised until they apply for finance or in this case re-finance and are refused.
The reason home owners should perform a credit file check prior to finance application, is because sometimes too many credit ‘enquiries’ can also hinder finance approval.
If a credit enquiry from a lender finds a default against a person’s name, warranted or not, they will be refused finance. That lender’s ‘enquiry’ now shows up on the credit file for 5 years along with the default, creating two negative entries instead of one.
A bad credit rating can result when a bill or repayment goes unpaid past 60 days. After this time, a creditor has the right to list that non-payment as a ‘default’ on the person’s credit file.
In the current finance market, any black mark generally results in an automatic decline with the major lenders.
The volume of credit file errors on Australian credit files is uncertain.
A Veda Advantage spokesperson recently estimated 1% of the 250,000 credit reports they give out as a credit reporting agency to Australians every year contain a material error on the credit file.
But the Australian Consumer Association (now Choice) survey from 2004 revealed that 34% of the credit files surveyed in their small scale study contained errors or inconsistencies.
Approximately 63% of the clients who request credit repair have defaults, writs or Judgments which are listed in error on their credit file.
We have clients who are facing identity theft; some are caught in issues over separation from their spouse; some have been disputing the bill which went to default stage and many people are just victims of the fallout from inadequate billing procedures – wrong names, wrong addresses, human and computer errors.
Under current credit reporting legislation, consumers are entitled to obtain a copy of their credit report from the credit reporting agencies once a year. A person requesting their own credit report does not generate a ‘credit enquiry’ on their credit file.
People need to contact all the credit reporting agencies to request their report – as creditors have access to 3 agencies within mainland Australia and 4 in Tasmania. The report must be provided to them in writing within 10 days of the request.
Listings are not removed by creditors unless the file holder can provide adequate reason and lots of evidence as to why the listing should not be there.
Credit repair requires knowledge of the legislation, lots of evidence and perseverance. But for those people whose financial freedom is hindered because their credit file contains errors, it is a point worth fighting for.
People can contact MyCRA for help with getting a free copy of their credit file on 1300 667 218 or visit www.mycra.com.au.
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