Lose your credit rating without even knowing
How can you lose your credit rating without even knowing that you had done anything wrong?
Cartoon by Michael Mucci
Banks seem to have us where they want us
Just a couple of weeks ago we had a new client with a very stable well-paid government job, excellent equity in an investment property, owing nothing substantial to anyone apart from his very manageable investment loan and looking to buy another property but to our astonishment was actually rejected by the first lender approached on his behalf. Another lender was approached and the client had no problem in getting the loan after “the problem” was fully explained.
….. So what was ‘the problem?’ Quite simply, he had approached a couple of lenders by himself over the last year to see how much he could possibly borrow. In his search, he had found very good lower rate deal and switched his loan – no problem. While he was doing this, he took advantage of a couple of really good interest free deals on a couple of credit cards, something that is encouraged by our government and some financial planners, “If you’re not happy with your lender, shop around and move” and why not take advantage of interest free periods on your credit card?
This all seems sensible and very reasonable, until he applied for a new investment loan only to discover that his credit rating had been lowered considerably to the point of him being a bad risk! Like the author of today’s SMH story our client had never defaulted or been declared a bankrupt and had been in well-paid secure employment for over 10 years. His rating was below 700. The ratings are done on a scale from 0-1000, excellent is 800-1000; very good is 700-799; good 625-699; OK 550-624 and below average was zero-549.
The problem? … every time he applied to a credit-card provider for a new loan or a new card, an inquiry was made to the credit data base and each inquiry, while not raising any concerns, stays on your credit rating and affects your credit rating!
The marks you get because you have changed your loan provider or applied for a new credit card stay on your credit rating for five years until they are rolled over.
Michael Evans conclusion to the article he has written about his own credit rating is,
“In a system where the major financial institutions have significant pricing power, credit score cards can feel like they’re stacked against customers trying to encourage competitive behaviour.
Trying to get one back against the banks comes with a cost, and it’s not always in the fine print.”
I agree, and it’s well worth your time to have a look at the full article on this link: http://goo.gl/Uv6eUz
