As brokers are increasingly conducting more and more credit checks for clients, this puts them in a stronger position to help borrowers through the lending process, says one leading financial agency.
At the Veda Australian Credit Scorecard Media Launch yesterday (27 October), Angus Luffman, the firm’s general manager of consumer risk said that brokers offer some advantages for credit checks in their role as an ‘access seeker’.
“An access seeker is a consumer or someone acting on behalf of a consumer,” Luffman said. “They’re getting hold of [a credit] file on behalf of the consumer as part of helping to fulfil a mortgage application process.”
Most importantly, this activity will not affect the client’s final credit score, he added. Rather, it goes on file as a simple file access.
Furthermore since brokers act as consumers and not lenders in this process, they are not bound by reciprocity, Luffman said. This means that information will be freely available without the need to provide additional data beforehand.
“This puts a broker in a pretty strong position when helping to manage that consumer. It also puts the consumer in a strong position for that process.”
Izzy Silva, general manager, consumer for Veda, also spoke on how lenders were responding to the rise in the number of credit checks.
“Twenty-three per cent of people have now accessed their credit score, compared to just 11% in 2015. This number climbs to 26% of people under 30 suggesting Millennials are more credit-aware than the average
Aussie.”
In
a further study released by Veda in August, the number of credit checks done by brokers surged by 72% over the past three years.
Silva predicted this rising trend would mean banks should start adjusting rates according to credit scores in what was termed ‘risk-based pricing’.
“What we’re seeing in the mortgage space is that there are new entrants coming in who say, ‘Let’s capitalise on the fact that more Australians understand their score and let’s look at what we can provide them aside from what the big banks can offer.’"
“We’re early days in terms of risk-based pricing but it is coming. It will take a few years for it to mature.”
Finally, Silva discussed the differences between the banks and non-banks in how they use a client’s credit score and credit history.
“The more data you have, the less you need to worry about the score. The big four or the next tier down will have plenty of data to work out most things so they’ll use a credit score on file,” he told
Australian Broker.
On the other hand, smaller lenders may be more inclined to rely more heavily on something like a full credit history, he said.
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