Potential effects of changes to Credit History Laws
If you’ve ever applied for credit or a loan, you will usually be listed with a credit reporting agency. Credit providers use the information in your credit report to help work out whether you can afford a loan, or a larger limit on an existing loan, and whether you are likely to be able to repay it. Your credit report includes information about your credit history that is collected by credit reporting agencies, such as Veda Advantage and Dun and Bradstreet. The recently introduced credit history laws now allow these reporting agencies to collect more information on individuals and small businesses. This can be of benefit to those with a positive credit history as it will allow them to negotiate better deals with a finance provider.
Previously, credit reporting agencies were restricted by privacy laws that limited the amount of information they could provide to just your basic details and credit applications, not including the result. Negative events such as defaults, credit infringements, bankruptcies, court judgements, debt agreements and personal insolvency were also included. However the recent laws now allow for positive information to also be included, such as the type of credit/loan (eg mortgage or credit card,) the current limit as well as the opening and closing dates of each credit account held by an individual or business owner.
Potential benefits to individuals with a positive credit history
• Ability to apply for credit from a bank different to their current one. This is due to the fact that other financial institutions are now able to see the positives in a person’s credit report and are more likely to loan him or her money.
• Easier to demonstrate good practice.
• More of a chance to gain extension on credit repayment if you have a positive history.
Potential benefits to small business with a positive credit history
• Lower borrowing rates due to the creditworthiness of the individual owner.
• Ability to demonstrate to possible credit providers that they have met past obligations in a prompt manner.
• Ability to negotiate far more competitive rates when sourcing funds to enhance the business
• No longer have to put their home up for security or borrow on higher, personal credit card rates, in order to finance the business
While the recent changes are mostly beneficial to individuals and small business owners, it is important to be aware of the little things that can have negative impact on your credit report. For example, a business that pays its 30 day accounts on a 60 or 90 day basis to manage its cash flow, may be marked with poor credit history in the future. Also be aware that lenders will have a lot more information from which they can reject credit applications.
Here at The Quinn Group, our experienced team of lawyers and accountants are able to assist you in maintaining a positive credit history, as well as helping manage your personal or business accounts. For more information on the recent laws submit an online enquiry, or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.