Do late repayments affect credit score that much?

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Jessie
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Joined: Tue Oct 01, 2019 8:34 pm

Do late repayments affect credit score that much?

Postby Jessie » Tue Oct 01, 2019 8:36 pm

Hi,
My credit score fell off a cliff because of a couple of late repayments. On top of that, I went through a couple of lenders trying to find a decent car loan. It seems they were marked on my credit report as credit enquiries. I’m afraid my low Equifax score of 450 will disqualify me for a competitive home loan. Do late repayments affect credit score that much? What can I do here?

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Otto Dargan
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Re: Do late repayments affect credit score that much?

Postby Otto Dargan » Tue Oct 01, 2019 8:42 pm

Hello Jess. Welcome to the forums.

Comprehensive credit reporting (CCR) was implemented in Australia from July 2018, under which your credit file/ report also shows your ‘repayment history information’ for the last 24 months. So, if you’ve had any late repayments these get recorded which in turn negatively affects your credit score.

That is only if you’re late by more than 14 days or two weeks, they’re recorded on your file. If repayments are overdue for more than 60 days then they’re listed as defaults.

Too many credit enquiries also negatively affect your credit score. We usually recommend keeping credit enquiries to 2 or less six months prior to applying for a home loan. The good news is credit enquiries do not affect your score for long as they usually do not have a significant enough impact after 12 months.

CCR has both benefits and drawbacks for borrowers.

Our mortgage brokers can access your credit report without leaving a credit enquiry and do a full assessment. We have lenders on our panel who can consider a few adverse credit listings and offer competitive home loans.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Jessie
Posts: 3
Joined: Tue Oct 01, 2019 8:34 pm

Re: Do late repayments affect credit score that much?

Postby Jessie » Wed Oct 02, 2019 11:51 am

So, this CCR is basically penalising me instead of helping people struggling to meet their repayments. When lenders won’t give you a loan when you have a default what’s the point of this?

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Otto Dargan
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Re: Do late repayments affect credit score that much?

Postby Otto Dargan » Wed Oct 02, 2019 12:49 pm

Hi Jess,

That’s true. Positive credit reporting or CCR has both benefits and negatives. The main negative is that previously lenders were only able to see if you had defaulted on a loan, however, now they can also see if you’re making regular repayments on time. That means a temporary change in financial circumstances can negatively affect your credit score.

However, at the same time, people with bad credit can benefit from positive credit reporting as they are now more likely to be approved by a mainstream lender if their last 2 years repayment history information is perfect.

So, there are both winners and losers when it comes to home loan approval.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Jessie
Posts: 3
Joined: Tue Oct 01, 2019 8:34 pm

Re: Do late repayments affect credit score that much?

Postby Jessie » Wed Oct 02, 2019 5:39 pm

Okay. I plan to apply for a home loan in the next two to three months once my rental lease is up. In the meantime, what can I do to improve my credit score?

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Otto Dargan
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Location: Sydney, Australia
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Re: Do late repayments affect credit score that much?

Postby Otto Dargan » Wed Oct 02, 2019 7:35 pm

Hi Jess,

To improve your Equifax score, there are a few simple steps you can:
  • Get your credit report and check to ensure all the data is correct. You can get a free report by directly contacting Equifax. If there any discrepancies ask them to fix it.
  • Avoid applying for any more credit.
  • Pay all your bills and debts on time.
  • Avoid moving address or employer unnecessarily.
  • Avoid applying for credit with less reputable lenders like payday lenders.
Keep in mind that improving your Equifax score is different to improving your credit score with a particular lender. Equifax only looks at your credit file whereas a lender is looking at all facets of your home loan application. Another tip is to open an account with the lender you plan to apply for a home loan with.

There is more to getting approved for a home loan than just your credit score. Our specialist mortgage brokers are experts in the policies of almost 40 lenders on our panel.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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