New legislation to hinder homebuyers
Comprehensive credit reporting legislation could make it harder for Australians to purchase a home, according to Credit Repair Australia.
The changes to the Privacy Act, which come into effect from March 2014, will make Australians' payment behaviour more accessible than ever to banks and other financial institutions, as Australia transitions from a negative to a comprehensive credit reporting system.
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While Credit Repair Australia’s chief executive Richard Symes supports the move to comprehensive credit reporting, he notes that the change will impact how lenders determine ‘credit worthiness’ of Australians, and their ability to obtain credit.
“The implementation of comprehensive reporting will bring Australia in line with other G20 nations such as the United States and the UK. In fact, as one of only a few western countries still using negative reporting, the shift by Australia might be considered as simply catching up with the rest of the world,” he said.
“Overall, we believe this to be a positive move, as it should provide lenders a better indication of a person’s ability to maintain payments. Creditors will soon have more information at their disposal in order to identify undisclosed debts, late payers and repeat offenders, in addition to a reasonable idea of how much other debt the borrower has, allowing the lender to more accurately assess serviceability.
“That said, whilst the intent of the legislative change is to assist lenders in determining the credit worthiness of an individual, there will be cases whereby people who would otherwise be approved for personal finance today, may be declined come March 2014. Furthermore, habitual late payers who consistently pay their bills, but do so past their due date, may find themselves with a bad credit rating.”