1 November 2011
Home loan rates are set to be reduced today, but for millions of Australians who are living with defaults on their credit file, they will be hit with $22,867.15 more in home loan repayments over the first three years of the loan.
The Reserve Bank of Australia is today tipped to hand over a reduction of a quarter of one percentage point in interest rates, taking the cash rate down to 4.5 per cent.
Some big banks are expected to respond immediately, with the potential to pass on a saving of $49 per month to the average householder.
But for those approximately 3 million or more Australians who are living with credit rating defaults, the interest rates cuts will be negligible.
A national credit rating repairer says those families who are unlucky to have defaults on their credit file for 5 years will be paying a staggering $702.21 more per month with non-conforming loan interest rates.
“We talk about massive savings for the average Australian with these cuts, we talk about encouraging people to switch lenders to increase competitive rates, but this is not a reality for people with defaults.”
“Most banks won’t lend them money, forcing them into non-conforming loans and paying top dollar because their credit file shows they are a bad risk – and it may not be true,” says Graham Doessel from MyCRA Credit Repairs.
There are more than 14 million credit files in Australia (14.7 million files are held by credit reporting agency, Veda Advantage alone), and approximately 3.47 million negative listings, but the number of possible errors which exist is not certain.
The possible volume of errors on Australian credit files was exposed by a small scale study conducted in 2004 by the Australian Consumer Association (now Choice Magazine). It revealed about 30% of credit files were likely to contain errors.
“In our view, there are serious, systematic flaws which are leaving an increasing number of Australian consumers vulnerable to defamation, mis-matching and harassment,” the ACA report said.
Transferring those figures from the Choice study to the number of credit files in Australia today, could mean potentially 4 million errors currently exist on credit files in Australia.
Recently Channel 7’s Today Tonight interviewed Veda Advantage’s Head of External Relations, Chris Gration on the possible number of errors on credit reports. He admitted errors within their system alone amounted to 1%.
“We give out about 250,000 credit reports to consumers every year. But only in 1 per cent of cases is there a material error on the file, so a default or an enquiry that’s incorrect,” Mr Gration told Today Tonight.
Mr Doessel says,
“Even if as little as 1 per cent of those 14 million credit files contained errors, that would still currently leave 140,000 credit files in Australia containing errors that just shouldn’t be there.”
Under current credit reporting legislation, it is up to the consumer to check for errors.
Credit file holders are able to obtain a copy of their credit report from one or more of Australia’s credit reporting agencies for free every 12 months.
But Mr Doessel says consumers are often not aware across the board of their responsibility to check the accuracy of their own credit file, so many errors go undetected.
“Often it is not until people apply for a loan that they learn they have an adverse listing on their credit file, but by then it is too late and they are generally refused credit or forced to take on non-conforming loans at sky-high interest rates to secure the home,” he says.
When disputing any adverse listing, it is up to the credit file holder to provide reason as to why the creditor has not complied with legislation.
“Unfortunately many people find this process difficult – negotiating with creditors is not always easy for the individual to undertake. Our job as credit repairers is to check the process of listing defaults for legislative and or compliance errors, any such errors could deem the credit file default listing unlawful, at which time we advise the creditor to remove the default,” he says.
Please contact: Lisa Brewster email@example.com
MyCRA Credit Repairs is Australia’s leader in credit rating repairs. We permanently remove defaults from credit files.
1. 3.47 million negative listings in Australia, Veda Advantage November 2008
2. Based on average loan of $400,000 over 30 years on non-conforming loan interest rate of 95.% vs standard variable rate of 7%