The business manager of an international credit repair group estimates that 50 per cent of mortgage brokers in Australia do not obtain a credit report on their clients before submitting a mortgage application.
Princeville Credit Advocates business manager Neil Baker told The Adviser that an alarmingly high proportion of brokers do not obtain a credit report before submitting a home loan application, while an even higher proportion of brokers obtain a credit report but do not make full use of it.
“There would be more than 50 per cent [of brokers] that aren’t using the credit report to their advantage,” Mr Baker said.
“But just those brokers who aren’t getting a copy of someone’s credit reports before they put an application in, I wouldn’t be surprised if it’s about 50 per cent,” he said.
Mr Baker warned brokers that they can waste a huge amount of time by not obtaining a copy of a client’s credit report before submitting a deal.
“When you look at a credit report, there is a whole lot of information you can learn from it that can be helpful to a broker,” he said.
“But there is one constant that doesn’t change and that is every single time a home loan is submitted, the credit report will be checked by the preferred lender and it can make or break the deal.
“Knowing that that piece of paperwork is integral to the whole process and can make or break the deal – why wouldn’t you look at it first just to make sure?”
In addition to wasting a broker’s time, failure to identify issues on a client’s credit record can potentially mislead the client into believing they won’t have a problem obtaining finance, encouraging them to begin searching for a property, Mr Baker said.
Brokers will be under even greater pressure to use credit reports when repayment histories are introduced to the Veda credit reports. This will show the last 24 months of transactions on finance facilities.
“If a broker doesn’t get a Veda report then, they’re in the wrong game,” Mr Baker said. “It would just be ludicrous not to access that document and view it when you’re filling in an application for a client.”
In the UK, Princeville has been reviewing client credit reports that show details of repayments history for a number of years.
The only reason banks use it, Mr Baker said, is to find ways of charging clients a higher interest rate.
“It’s rate for risk. All deals as a result of this, when it does finally come out in Australia, will be written just like a Pepper or Liberty loan on a rate for risk basis,” he said.
“In the UK right now, only 40 per cent of all mortgages have been written at a prime rate. Sixty per cent of all mortgages that exist in the UK now were written above prime rate because of positive credit reporting.”
Mr Baker’s comments come after the FBAA announced this week that it had partnered with Veda.
FBAA members are now able to access credit scores through VedaScore Apply and credit reports for borrowers at a discounted rate.
[Related: FBAA partners with Veda]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
The share of new loans approved with an LVR greater than 80 per c...
More than a quarter of the $4.19 billion dollars of bank fees cha...
Peer-to-peer lender RateSetter has announced that it has dropped ...