Here it is! Some good news for first home buyers at last. New rules are being introduced at the end of this year to give lenders greater access to “positive data” about potential borrowers rather than simply ‘the negative’. These rules should make it easier for first home buyers, who may not have a “long credit history” to get their loans approved.
At the end of 2017 for the first time “positive data” will be available to lenders to help them assess loan applications. The Federal Government has fast-tracked these changes that allow greater data sharing between banks, meaning potential borrowers will be able to be assessed on how well they have repaid loans for up to a preceding two year period.
This move means more Australian borrowers will see a fairer system, sooner. This fairer change was recommended by the “Productivity Commission”, and is targeted to those seeking approval for home loans.
The way the lending system currently works is when borrowers apply for credit, the lender applies for permission to view the borrower’s credit file to help them assess if they will be able to repay the loan. The new rule means that lenders will not just see “negative” information but also “positive” data, such as how well the potential borrower has repaid a credit card debt, personal loans etc. The new data will also show how many credit accounts someone has, and how much credit they have in total.
These changes are most likely to see credit scores change, and in some changes, change drastically. The new data is likely to have far-reaching implications across a range of credit decisions including loan approvals and declines, changes in interest rates and changes in lending limits.
Industry research suggests that around 40% of lending decisions on credit applications will change in comparison to when only negative data was shared. It has been projected that with these changes, approval rates from the banks are set to rise by 10 – 15%.
This change may help potential first home buyers who may not have an established or long credit history, to get approved for finance where in the past, they may have been refused.
Finally!!! Some good news for First Home Buyers!