New website to combat credit rating ignorance
One in three Australians don’t know what a credit report is and how it can affect their financial future, according to the latest research.
There was a time where a credit provider could report a default against your name for late payments, without you knowing, and make it almost impossible to get credit in the future.
Now, aiming to make credit reporting more transparent, a new website will give people ongoing access to their credit history and up to date scores, in an bid to force lenders offer better rates to good customers.
New research shows eight out of 10 Australians have no idea what their credit score is and how it can be used against them.
In fact 40 per cent of those surveyed didn't even know there was such a thing as a credit score.
"Banks and credit card providers have been using credit card scores for decades, and they use that to determine whether or not they will lend you money and at what interest rate," said John Symond from Aussie Home Loans.
A new Aussie backed 'credit savvy' website is being launched tomorrow and will give consumers ongoing access to their credit rating – for free – sending through alerts when a customer’s slips up on repayments.
Thirty-year-old Erin Peak said she changes lenders often to get the best interest rate on her credit card and was surprised to learn her credit score was below the average of 690... her score was 484.
"It was pretty embarrassing because I think I’m actually pretty good with money. At the same time it was more a shock that what I thought was being clever has actually come back to bite more," said Peak.
In simple terms your credit score is divided up like this; 35 per cent is given to your payment history – do you pay your bills on time? Thirty per cent is your debt burden – how much you have borrowed and paid off, 15 per cent to length of loan, 10 per cent on the type, and another 10 per cent on how many inquiries a loan provider has checked your history.
Even though credit reporting laws were reformed last year to make the system fairer for consumers, encouraging lenders to record good payment history and not just bad, little has actually changed as it's still a voluntary system.
"I think for lenders at the moment when they have information on a borrower they really want to keep that to themselves. The longer they keep that to themselves they have a less competitive loan market," said Daniel Foggo, CEO at RateSetter.
Other findings of the research show that 80 per cent of people have not accessed their credit report, but 16 per cent of those say they have considered doing so.
Only seven per cent of respondents had accessed their credit report in the last six months. A further 38 per cent know what a credit score is but not how it is used to determine credit worthiness.
It's hoped this website will encourage customers to be smarter with credit, get a better credit number and help negotiate a better deal.
Visit creditsavvy to find out more about credit ratings.
News break – March 10
