A credit repair law firm is warning that new changes may not be “the saviour it’s being touted as”.
Banks have already begun sharing 50% of their credit information as part of comprehensive credit reporting (CCR) and are expected to share the rest next year.
The move is designed to mean the banks are more aware of a borrower’s ‘positive credit’ situation and can make better decisions on whether to lend.
While some experts have said this will allow borrowers who have previously been refused credit a chance at obtaining finance, it also works the other way round.
Former broker and now-CEO at MyCRA Lawyer, Graham Doessel, warns that many borrowers will now have a “black mark” against their names they did not know was there.
He said, “It’s often the case that these are young couples who are finally able to apply for a loan on their first home, and it's at that point they suddenly discover that they've been unlawfully credit-listed and with devastating consequences. The worst part is, it often isn’t even their fault.”
He explained that negative credit listings from old bills as little as $150 that were lost in the mail, or even outright mistakes, may be smearing up to 6.5 million Australian credit reports and can block consumers from credit for up to seven years.
Some borrowers have even been caught out by credit cards they believed they had paid off and left in drawers without ever shutting them down.
Under the new system, even without default late payments in a consumer’s past of just 14 days may still appear on their credit report and would make them a ‘riskier’ borrower in the eyes of lenders.
Doessel warned that if there is an error on a credit report, the legal hurdles are higher than most individuals can manage.
He added, “We're starting to hear of homebuyers being declined where the only blemish to their credit record is a 15 day late credit card payment. That's losing the chance of buying your family home for being just one day over the minimum threshold.
“Most consumers trying to resolve their own credit issues don’t have the knowledge of legislation or processes to effectively argue their case against these listings either. They are often brick-walled by their creditor and forced to put up with the default, banned from affordable mainstream credit for the term of the listing.
“Comprehensive Credit Reporting is not positive credit reporting and it's not the saviour it is being touted as, it's simply bucket loads of additional negative data that the lenders now have access to, to make it even harder for our hard working kids to realise their dream of home ownership.”
