Lenders have been keeping an extra-close eye on prospective borrowers’ spending patterns as a result of government regulations implemented back in 2018. If you’re considering getting a loan, you should be aware of what lenders can now look at, and how it will impact you.
What is Comprehensive Credit Reporting (CCR)?
Australia has laws intended to prevent vulnerable borrowers from taking out loans that they cannot afford. The regulations, known as Comprehensive Credit Reporting (CCR), require lenders to consider a borrower’s past purchases to a greater extent than they did previously.
Most experts agree that the new CCR regime is a great approach to lower the number of borrowers experiencing mortgage stress, who may otherwise lose their homes due to defaults on payments. However, the CCR guidelines mean that it is more crucial than ever to be frugal with your money and diligent about paying off debts before applying for a loan, especially if you’re looking to borrow for you first home or to refinance an existing loan.
It can mean the difference between getting that loan and not getting anything at all.
CCR and Lenders
As the name implies, CCR is all about credit, which includes credit cards as well as any previous loans you may have had, including car loans and other personal loans.
Before these regulations were introduced, banks and other home loan lenders used to only see the details of your existing debts, along with any instance of debt-related “negative action” (e.g. bankruptcies, defaults or financial court rulings.
Lenders now consider extra data, including account creation and closure dates, missing payments, all credit card limits (even if you’re paid off), and even whether you just make minimal payments on your cards.
Get in Shape for CCR
Comprehensive Credit Reporting shouldn’t have an impact on people who have a clean credit history: You should be fine if you haven’t taken out many loans and you have always made your payments on schedule. This also benefits you if you only have one credit card and pay it off on a regular basis.
However, it’s not so good if you have outstanding debts or multiple credit cards. Even if your cards are fully paid, lenders still see them as a liability. Cleaning up your accounts is a smart place to start if you want to increase your chances of receiving the home loan you want. You will prove that you have the self-control needed to make mortgage payments if you make sure to pay off your debts on schedule, each and every time.
Of course, loans are still available to people with a few bumps in the credit road. All is not lost … it’s just a bit trickier.
Speak With Us
Our home loan experts at Mortgage Broker Group can provide you with expert guidance on how to comply with CCR regulations. We can also assist you in getting a copy of your credit history and provide you with practical guidance regarding the possible responses from various lenders to your house loan application.
We help clients find the best possible home loan for your personal circumstances and, best of all, our service is free. Of course, if you get a loan, lenders will still charge you their usual fees.