Positive Credit Reporting


Responsible lending under the proposed National Consumer Credit Protection Bill 2009 (NCCP) is designed to ensure that consumers are not provided or suggested unsuitable credit for their circumstances.

In early October, Senator Joe Ludwig, Special Minister of State, announced proposed reforms to the Privacy Act and Regulations. An exposure draft of the legislation will not be available until early 2010

The proposed reforms introduce “positive” credit reporting.

Introduction of five “positive” datasets in an individual’s credit report file would enable a more comprehensive assessment of a person’s credit risk. The “positive” datasets are:

1/ type of each credit account opened (e.g. mortgage, credit card, personal loan);

2/ date on which each credit account was opened;

3/ current limit of each open credit account;

4/ date on which each credit account was closed;

5/ credit repayment history, which will include whether in the past two years the individual has met repayment obligations.

Until responsible lending obligations under the NCCP Bill begin in January, 2011, credit repayment history data won’t be available.

However, repayment history may be reported from April 2010.

At the moment credit reporting is “negative”, therefore more limited, eg, it only includes information about any applications for credit and overdue accounts (defaults) etc.

For credit providers, the changes should mean there is more information available for the assessment of a consumer’s financial situation and thus meet responsible lending obligations. However, it may also mean some consumers are refused credit or are offered less.

The above is information only, which is based on a draft of the legislation. It is for general information only and should not be relied on as specific advice for your particular circumstances or as a substitute for professional advice.

Low Doc with credit default

With  banks and mortgage insurers, it is becoming more difficult to get Low Doc loans with credit defaults. We have seen the mortgage insurers refuse to insure low doc loans with any sort of default. These low doc loans are commonly called credit impaired  low doc loans. One of the main criteria looked at with these credit impaired low doc loans, is the size of the default and whether or not it has been paid, and when it was paid. Minor telco defaults, and defaults $1000 or under, for low doc loans may be looked at differently to larger unpaid defaults.

For low doc loans with larger defaults they are still available. As a guide these low doc loans, may be done for residential properties in major metropolitan areas and up to 80% of the value or purchase price.

For credit impaired low doc loans without BAS the following will also be required:-

The last 4 months bank statements for your business account, transaction account, and last personal bank account statement.

With credit impaired low doc loans each one is assessed on its merits.

Please call us on 1300 LOW DOC and we will let you know what pricing we can do for you.

Low Doc Loans still available without BAS

Are Low Doc Loans still available without BAS? Yes. As the major banks have tightened their credit policy in regards to Low Doc Loans, it is true that they have become more expensive. The question is how much more? We are already starting to see some evidence of Low Doc Loans without BAS being quoted at high rates.

However, Low Doc loans without BAS are still available at or near home loan rates. If you are being quoted an investment interest rate that doesn’t begin with 5. something percent you may be paying too much. Generally, to purchase at the 80% mark, you will need clean credit, be registered for GST, it is preferable to have an ABN that has been registered for at least 2 years, and the residential property should be in a major area.

Of course all of the low doc loans applications are subject to a particular lender’s credit criteria.

Variable interest rates rising

With the large four banks increasing variable rates, Low Doc Loans are set to get more expensive. We are now also starting to see the emergence of two types of low doc loans. Low Doc loans with BAS statements and Low Doc Loans without BAS statements. Don’t be surprised if there is another rate increase for low doc loans before the end of the year.

We are also starting to see some lenders add a margin for the perceived increased risk of low doc loans.