MyCRA Specialist Credit Repair Lawyers

Tag: Steve Brown

How will the changes to the Privacy Act coming in 2014 affect borrowers?
Recently I was asked to participate on a panel of finance and credit experts, answering consumer questions on aspects of credit impacting credit card users. The question, ‘How will the changes to the Privacy Act coming in 2014 affect borrowers?’ is a really important question – but one which many Australians don’t think to ask. Thankfully someone did. Read what our panel of experts has to say about how the changes can impact you and your credit rating.

By Graham Doessel, Founder and CEO of MyCRA Lawyers.

This interesting article has been extracted from creditcardoffer.com.au website – a subsidiary of Credit World.

Ask An Expert: How will the changes to the Privacy Act coming in 2014 affect borrowers?

Written by Kalianna and posted on November 28, 2013
Expert Opinion: In our inaugural ask-an-expert question, we asked about a serious change to credit reports that we know will affect a wide range of credit card applicants;

How will the planned changes to the Privacy Act commencing March 2014 affect someone applying for credit? Will people be labelled as bad credit who were not before?

There are some changes coming in March 2014 that will impact everyone in Australia with a credit file – especially those looking to apply for a new credit card or loan in the next few years – so most adults aged 18-55. For a start, lenders will be able to see much more information than they can now when they request your credit file after you apply for a new card or loan.

Australia is moving towards a ‘positive’ credit reporting environment, where a good history with repayments and signs that you are reducing your overall debt will be rewarded and viewed positively by lenders. At the moment, lenders can see ‘negative’ information on a credit file. This includes:

Accounts that have been applied for (but not, for example, credit limits on credit card applications all of the time)

Defaults – where a payment is more than 60 days late

Default judgments or bankruptcy where a person has been the pursued through the courts in a debt collection action

The system will be similar to what exists in the United States, and the third credit reporting agency to enter Australia, Experian, may also have an impact. In general Australia’s credit reporting agencies have stated that they believe it could take around 12 months before the same level of data is reported on Australian borrowers as what the US FICO system provides for borrowers there.

Members of our expert panel agreed that those who want to apply for new credit in 2014 will be most affected by the changes, rather than those who already own their own home etc, though applications for refinancing or adding to your existing debt will not be immune to credit checks.

If you are wondering whether you might be considered ‘bad credit’ from next year, then pay close attention to the advice given below and start doing your research into ways to improve your credit file and keep your score high enough to get approved for the amount you want when it comes time to borrow. Our experts have highlighted areas to watch, and what lenders will be interested in so you know where to concentrate your efforts.

Graham Doessel

Non-Legal Director, MyCRA Lawyers

Someone applying for credit after March next year will have more information about them shown to lenders who request a copy of their credit report.

There will be five new data sets available to lenders,

repayment history information;

the date on which a credit account was opened;

the date on which a credit account was closed;

the type of credit account opened;

and the current limit of each open credit account.

Quite possibly there will be more people considered to have ‘bad credit’ after March 2014, once new laws are implemented. The most significant credit rating damage could come from repayment history information.

Australian consumers are currently under the microscope with their repayments. Since December 2012, individuals who are more than 5 days late in repaying licenced credit (eg credit cards and loans) have a late payment notation marked against their name. This information will be available to lenders on the individual’s credit report from March 2014. This is in addition to the current default information which is shown after repayments fall more than 60 days in arrears.

While many have argued that only a pattern of late payment notations would hinder access to credit, I have maintained that even one or two late payment notations could at least affect the interest rate an individual is offered.

This change could trip up many Australians and mean people are unnecessarily banned from credit due to simple billing mistakes, lost paperwork and other payment mishaps.

A history of applying for the ‘wrong’ type of credit could also be detrimental and possibly pull down any credit score calculated on the individual.

Nick Vamvakas

Chief Risk Officer, ME Bank

With the introduction of the privacy act more information will be recorded about a person’s credit history. This includes positive credit behaviours, which were never previously recorded and some negative behaviours that weren’t previously recorded such as late credit card repayments (previously only credit card defaults were recorded). Overall this new, more complete, approach gives credit providers a better picture of a person’s credit history and has significant benefits for people applying for credit. Their credit history will be more accurate and provide a truer and fairer reflection of their ability to manage the credit for which they’ve applied.

Dominique Bergel-Grant

Founder, Leapfrog Financial

Without doubt there are changes around the corner that will significantly impact all those applying for credit after March 2014. The changes to the Privacy Act will enable prospective lenders to know more about you than you probably even do. From details about account repayment history, types of accounts and detailed credit information about the account status.

This is far more detail than what they currently have access to and will ensure nothing unwanted slips through. A big difference is the repayment history of up to 24 months being provided is a significant increase to the typical 3-6 months most lenders currently require. So being well behaved with your credit will be even more important than ever otherwise you will find yourself needing to explain any inconsistencies which could lead to a loan application being declined.

Heidi Armstrong

CEO, State Custodians

The changes to Australia’s credit reporting system will have a greater impact on those applying for credit. Not only will credit providers be able to see any repayment defaults, bankruptcies or past credit applications, but they will also have access to the past 24 months of your credit repayment history going back as far as December 2012.

This can be either a good or bad thing, depending on your financial situation. If you are diligent with your repayments and always pay bills on time, it could help improve your chances of success when applying for credit. However, if you have been late or missed repayments in the past 24 months, lenders will be able to see this and may factor this into their decision whether to approve or decline your credit application. Therefore, it is more important than ever to make an effort to keep your repayment history clean.

Steve Brown

Director, Consumer Risk Solutions at Dun and Bradstreet

The changes to Australia’s credit reporting system will improve the detail and accuracy of the information used to assess applications.

For those applicants with a history of sound financial management, the additional information will provide a more detailed view of their creditworthiness. The addition of repayment history data will also allow individual’s with a previous credit slip-up to demonstrate they have rectified their credit position by making regular and on-time repayments.

Equally, with provisions to record payments made five-or-more days late, changes to Australia’s credit reporting system mean that those people who regularly make late repayments will become more visible to credit provider.
If you would like to know more about upcoming Privacy Law changes, visit our blog www.mycra.com.au/blog.

Image: Stuart Miles/ www.FreeDigitalPhotos.net
03/12/2013
Help with credit card applications
Recently I was asked to participate on a panel of finance and credit experts, answering consumer questions on aspects of credit impacting credit card users. A common question “How long should I wait before applying for a new credit card?” was asked of our expert panel. If you wondered about this yourself, you should read this article, and have a look at what experts on the panel have to say which could help you and your credit rating.

By Graham Doessel, Founder and CEO of MyCRA Lawyers.

The article seen here below in full, is published on credit card comparison website www.creditcardoffers.com – a subsidiary of Credit World.
Ask An Expert: How long should I wait before applying for a new credit card?

Written by Kalianna and posted on December 2, 2013
One of the most common questions we get at Credit Card Offers is whether or not it is too soon to apply for a new credit card or other credit product after taking up an offer. It’s a confusing situation for us as borrowers, with some lenders saying three months is long enough to wait, and others advising that two fresh applications within one year is the maximum we should be lodging if we want our credit files to stay in tact, including our expert Dominique Bergel-Grant, whose full answer to the question is below. Dun & Bradstreet’s Steve Brown tends to agree that too many applications will simply raise a red flag for lenders, and Dun & Bradstreet is one of the major credit reporting agencies operating here in Australia, which supplies information on consumers and businesses. The definition of ‘too many’ credit applications each year is open for some debate too, as according to State Custodians CEO Heidi Armstrong, up to four or five applications per year can be acceptable, depending on other factors.

As another of our experts, Graham Doessel points out, some lenders may even decline your application automatically if you have made too many applications – and that won’t matter whether or not you actually took up offers of credit after those applications. If you find yourself in that situation, you may have an option to speak to lenders and/or credit reporting experts to rectify the situation. ME Bank’s Nick Vamvakas does mention that when lenders have access to more information, they may give less weight to factors such as the number of previous applications if they can see other good reason to believe you are creditworthy. It’s bound to be harder where you have been rejected by a computer though.

Doing balance transfers with credit card debt can also provide mixed signals – because lenders will see that you have simply moved debt onto another credit card, but at the same time they should also be able to tell that you are paying off that debt each month more easily with the extra information that will be available. That means that if you’re using them correctly, balance transfers can be a useful tool for your debt and your credit file, and not damage your ability to borrow.

The whole situation will be clarified further in 2014, when lenders gain access to a 24-month repayment history on borrowers’ credit files. We will start to see, over the course of the next year or two, what approach lenders take based on the new credit scoring system and the new information available. Until that time though, we can give you these words from those in the industry to take into account before applying for your next credit card or loan. Read each expert’s response and keep the information in mind when considering a new credit card or loan.

In our second Ask An Expert panel question we have responses from four different experts. Each lays out the key considerations lenders take into account, and different variables that you should be aware of before applying for a new credit card or credit product;

“How long should customers wait for applying for each new credit card? For example when transferring an existing balance from one card over to another to take advantage of 0% interest offers. What effect does this have on the customer’s credit score?”

Graham Doessel

Non-Legal Director, MyCRA Lawyers

Customers should definitely take precautions when applying for credit. The volume of credit people apply for and the type of credit can hinder any future credit application.

In terms of how long customers should wait before applying for each new card – it really depends on each lender. However, we are aware that some Credit Providers will have an automatic decline with individuals who have applied for credit 3 times in the last 6 months, or show 6 credit applications in a 12 month period.

In terms of credit applications impacting the credit score the general rule is:

Customers should only make a credit application they have full intention of pursuing.

Be wary of applying for ‘high interest’ or ‘bad credit’ loans –a credit ‘scoring’ method may shave points off your score through this type of credit application.

Seek cautious credit limits within your budget. Your credit score may be affected by credit limits which are considered too high.

Nick Vamvakas

Chief Risk Officer, ME Bank

In the old credit reporting regime, which will be replaced in 2014, the number of credit applications was one of the few indicators available to credit providers to judge an applicant’s suitability to receive credit. It was a negative indicator and a larger number of credit applications in a short period could create a negative impression. While the number of credit applications may still be used as a negative indicator in the future, it will carry less weight as other indicators will now be available to credit providers. It is therefore likely to have a smaller negative impact on borrowers’ credit scores.

Steve Brown

Director, Consumer Risk Solutions at Dun and Bradstreet

Each credit provider will have their own credit and risk scoring approach, however applying for multiple credit cards, loans or other finance in a relatively short period of time will show up on your credit report and be a potential red flag for lenders.

Numerous applications in quick succession can indicate a high level of risk and an irresponsible appetite for credit, especially if you have unpaid debts to begin with.

Heidi Armstrong

CEO, State Custodians

Each time a person applies for credit, it impacts their credit score. Around 4-5 credit applications per year is generally within the range of acceptable behaviour from the perspective of a main-stream lender. Therefore, if a customer is only applying for one or two credit cards per year (based around a 6 or 12 month balance transfer offer) then this is not necessarily seen in a poor light, provided the total number of credit enquiries during the year remain within the acceptable limits. Extreme care would have to be taken to only apply with one credit card provider and not put in multiple applications at the one time.

A lender can see what different credit applications a customer has made and too many enquiries will create a ‘busy’ credit report and result in a poor credit score. If customers are continually rolling the same amount of credit card debt over to a new card, it means they are not actually paying the debt off and lenders will start to look upon this unfavourably. Continuously transferring credit cards is a short term solution and doesn’t fix the real problem of being in debt. If customers wish to take advantage of interest free offers, they should try to only consolidate once and then make an effort to pay off the debt as soon as possible.

Dominique Bergel-Grant

Founder, Leapfrog Financial

As a rule you should not apply for more than two new credit facilities every 12 months. When lenders see more than this they start to become concerned about your motives, and although it could be due to chasing a low rate it will still be a mark against you.

Remember some lenders systems have automatic credit scoring, so if you fail due to multiple credit application then your application will simply be declined. The biggest tip is to get a copy of your credit report and know exactly what the lenders will be finding out about you. I recommend all my clients apply for a copy of their credit report once a year both to check for any errors, but also to ensure there has been no fraud.
We hope the help offered here by these experts has helped you to know more about not only credit applications, but credit reporting in general. If you would like to know about Australia’s new Privacy Laws and how they might impact you, read our next post.

FreeDigitalPhotos.net
03/12/2013
Credit survey shows mobile bill a priority at expense of mortgage

A NewsPoll survey sponsored by credit reporting agency, Dun & Bradstreet has found that financially strapped consumers would forego paying their mortgage before they skipped paying their mobile phone bill. We look at the details of this survey and the ramifications for their credit file if people choose this path in reality when they are under financial stress.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repair and www.fixmybadcredit.com.au.

The Age published a story The Hard Truth on Credit Reports on Sunday, detailing the results of this survey sponsored by Dun & Bradstreet. We look at an excerpt from it:

Newspoll asked 1200 consumers which bills they would not pay if they did not have enough money to meet their financial obligations. The mortgage is the most-nominated expense for non-payment, followed by pay TV subscriptions. More consumers would forgo payments on the mortgage, pay TV and electricity before they stopped paying their mobile phone bills.

The survey, sponsored by credit reporting agency Dun & Bradstreet, goes against the accepted wisdom that most people would think it essential to keep paying the mortgage on time. Steve Brown, head of the consumer credit bureau at Dun & Bradstreet, says the results are probably explained by the fact consumers think about the consequences of not making their financial obligations.

”They are looking at how their lifestyle would be affected,” he says. ”With the mortgage, the reality is nothing is likely to happen for months,” Brown says. That is because there are processes that have to be followed by a lender before the house can be repossessed and the lender is going to negotiate first with the borrower.

Brown says another factor could be that delaying a mortgage payment ”frees up” more cash than not paying some of the other household bills. Many people probably feel they cannot do without the mobile phone, he says. The pay-TV subscription, he says, is probably regarded as a bit of a luxury.

Whilst these suggestions from Mr Brown are fair assumptions, one of the other reasons consumers could be nominating their mobile phone bills would be paid on time over their mortgage could also be to do with the long history of difficulties associated with dealing with telcos in situations of financial difficulty. Perhaps there is the perception that banks would be fairer in their approach to difficulties, and easier to deal with than telcos in these situations. Consumers have in the past experienced problems with customer service with telcos. The multitude of complaints in this area resulted in a major inquiry by the Australian Communications and Media Authority (ACMA) and the report – Reconnecting the Customer. (The telco industry has since developed a Telecommunications Consumer Protections (TCP) Code which came into effect on 1 September 2012).

The other thing this report reveals is a lack of awareness across the board of current laws around reporting of late payments on Australian credit reports.

If you are in real financial difficulty – try to sort it out with all of your Credit Providers prior to being late with any bill payment. But if you were to choose which credit account to miss paying – don’t make it the mortgage or credit card!

Here are the current rules governing Australian credit reports:

Repayments to licenced Credit Providers – including payments due for mortgages, credit cards and other licenced credit must be made on time. If you are more than 5 days in arrears with these payments, a late payment notation will be recorded against your name. This has been happening in Australia as of December 2012 and will show on your credit report as of March 2014. Late payments will be erased after two years. If you are more than 60 days in arrears on any account – including licenced credit, mobile phones and utilities, you will have a default recorded against your name. Defaults will be erased after five years.

Brown says about 85 per cent of people have no reportable problems under the present system. Another 5 per cent have multiple incidents of payment defaults.

The remaining 10 per cent have had a ”bump in the road”, Brown says. They will have missed payments due to a life event, such as losing their job or because of an ill partner, but will have since returned their finances to good order.

Brown says the extra information will help the 10 per cent who have had occasional problems to restore their credit worthiness more quickly. However, there are some individuals who are ”teetering” on defaulting but are receiving more credit because lenders are not seeing the fuller picture.

”Some of the 85 per cent who do not have any reportable problems under the current reporting system are, in fact, overcommitted,” Brown says. They may find it harder to get credit under the new regime, he says.

While the intention of the legislation may be to weed out “overcommitted” borrowers, we have long argued since the repayment history legislation was first in the pipeline that the reporting of late payments will mean those who have even one late payment will be subject to higher interest rate charges while the repayment history information sits on their credit file. We will be watching this phenomenon closely as it unfolds as of March 2014. We hope this new information won’t be a tool to charge higher interest rates to borrowers who have had a “bump in the road” or who have even just missed a repayment due to life circumstances such as holidays, or missed bills and is just used as it is intended – to seek out the overcommitted who are constantly teetering on default.

How to Handle a “Bump In The Road” under the New Laws.

For those people suffering temporary debt stress, there is now a large incentive to talk to your bank.

If you are suddenly unemployed, fall ill, separate from your spouse or have a period of intense debt stress – you should know there are laws that may be able to help you through this difficult time. By putting your hand up early– before your accounts go into arrears – you could save your credit file.

If you are experiencing temporary financial hardship you should contact your bank or building society or other Credit Provider and ask to speak with the Financial Hardship Variation Team.

Using the specific words ‘financial hardship’ will help make it clear to the bank what you need. Ideally, act before you fall into arrears on your account – to save your credit file when you recover from this difficult time.

They may make arrangements with you to get you over this temporary bump in the road, which could include reducing repayments, or freezing repayments for a period of time. To find out more, read the Australian Bankers’ Association’s Factsheet on financial hardship.

To access more information about your credit file, contact MyCRA on 1300 667 218 or visit our website www.mycra.com.au.

Image: Naypong/www.FreeDigitalPhotos.net

10/09/2013