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Credit scores mark turning point for borrowers

Shaun Drummond –Sep 6, 2014

Lenders and credit bureaus say the huge interest in website Getcreditscore when it launched on Tuesday marks a turning point for borrowers in Australia as they wake up to their ability to use new credit scores to bargain on interest rates.

Non-bank lenders also want to use the scores to improve their own funding costs by listing them alongside the loans they package up and offer to debt investors.

Backed by peer-to-peer lender Society One, crashed due to the amount of traffic on its first day on Tuesday. By Friday it had received 299,000 unique visits and 403,000 hits. The site gives people their credit score for free, calculated by credit bureau Veda Group based on their borrowing history.

Getcreditscore spokesman Christopher Zinn said everyone was surprised at the response.

I thought I would have to do a lot more work training and educating people so they understand what a credit score is, he said.

The interest in the scores comes despite banks dragging their heels on contributing extra positive credit data under the new credit reporting regime that came into force on March 12.

At the moment, the scores – which rate credit worthiness with a score from 0 to 1200 – are based on negative default data and the number of loan applications. Lenders can now also provide monthly repayment histories, as well as report repayments that are more than 14 days overdue. None have as yet because they are finalising guidelines to ensure such data isn’t misused.

The extra data will make the scores change more quickly and allow a good repayment history of credit card bills, for instance, to offset a default.

The credit scores are based on the credit files of Australians that Veda – the country’s biggest consumer credit bureau – keeps and that lenders contribute to and check for borrower credit worthiness.

Veda spokeswoman Belinda Diprose said there had been an overwhelming response but would not say how many people actually requested credit scores.

It perhaps is a turning point for what’s to come, she said.

Society One, which is an online platform for matching individual lenders and borrowers, is the first to offer interest rates based on credit scores in Australia. Its rates for personal loans range from 9.95 per cent up to 15.6 per cent for those with the worst credit score. It pays Veda to offer the scores and financed the site because it wanted to use them to differentiate itself from banks.

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