Credit Ratings

The Garage
#1

G’day,

We’ve been out of the property market since 2012, but are hoping to pick something up in the next 2 years or so, now my wife’s rejoined the workforce.

With her working, we decided to replace one of our old cars, and were going to save for it, but then decided it would be better to take a loan out, as banks (used to?) like you showing your ability to service a loan.

Before taking this step, I checked my credit rating, curious to see if the odd late phone bill had caught up with me. And - my rating was over 800 / 1000. “Excellent”.

Take out a $20k loan… and my credit rating drops 100 points. “Very Good”.

A month later, it’s dropped a further 40 points, despite not just paying my repayments on time, but paying 4x the amount required. “Good”.

What’s going on here?

Reduced borrowing capacity due to the new loan, driving the points down? OK, I get that - but why the further decrease, when I’m making my repayments on time? There’s no negative reports on my rating.

I think I preferred ignorance…

cheers

cosmic

#2

I didn’t even know there was a number or that you could look it up in Australia, I always thought that was an American thing. Where do you get this information anyway? I’d be interested in what sort of number I have for shits and giggles.

I think that if you can show a regular savings history or loan repayments they take that as a positive compared to someone who just spends it all on ‘stuff’ every fortnight. Beyond that I always though it was a matter of capacity to repay being the primary factor.

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#3

I believe we’ve always had a credit system, but I don’t think it’s been as “public” as it is in the USA. I just went with the first listed site on the ATO’s website. Free service.

From what I went through getting the car loan, and what I’ve recently read about banks & loans - due to the Royal Commission - they are now looking a lot harder at prospective customer’s spending habits. When I got my previous mortgages, there was NO serious “budget” considerations asked (mortgage brokers both times) - just “What’s your total cost of living?”. This time however, they wanted to know the breakdown of where my money goes, such as:

Internet
Phone
Childcare
School costs (myself & kids)
Health
Groceries
Dining Out
Automotive / Petrol
Entertainment
Insurance

There was more I’m sure.

The “funny” part was… To answer the queries, I was using my CommBank’s spending “app” to give my answers. I did wonder as I was answering the questions whether the person on the other end (also Commbank) was looking at the same details…

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#4

Thanks for the Credit Savvy link. I didnt know these places existed. I got 862 which I guess is fair, since I am running a credit card and pay 4x whats needed each month. I want to get it paid off but theres always something… currently, a HWS about to crap itself. Oh well, it can be paid out of my estate when the time comes.

#5

Woohoo! For no particular reason, my rating just jumped almost 100 points (upwards). Now back to just a bit below what it was prior to taking out the car loan earlier this year.

I’d love to know what algorithms are taking place to calculate these scores…

#6

Banks are tightening their lending standards, and understandably so. We’re sitting on the precipice of a sub-prime crisis here in Australia. Every second person is over-leveraged, every third person is over-leveraged on their housing on average by about $500k and the bottom is about to fall out of the market leaving people with a capital loss. Except this time the capital loss wont be on purpose, and it’s going to come back to haunt the government that they did nothing to fix the rules with capital gains tax exemptions.

The best thing to do right now is to pay off your loan, and to not take out a new one at least until this shit show comes to an end. This is without talking about the issue above. The level of personal debt is out of control.

Some people laugh at me when I say I’ve never had credit and always have bought things based on what I can afford at the time. So I have a shit car, I don’t have the latest iPhone and I have an 7 year old MacBook Pro… and? They work… I’m not Mr. Jones. Why do people live their lives being exposed to other people’s risk? Why do they live their lives being one tragedy, job loss or eviction from their whole life falling apart? Anyone who has ever run a business will understand the lunacy of this and you’re in the business of running your life as a corporation as part of the capitalist world we live in.

I will laugh at them when they are reamed by the government for being over leveraged. Since 2013 we don’t have the same lending standard, we are in debt to the tune of over $1trillion dollars. That is more than 100% of our GDP. It will never be paid off again. We are also exposed to US debt now also because the banks have been having to get money from somewhere.

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#7

I think its Veda or something that does your credit rating.

#8

It is a bit macabre, but I was hoping the housing price slide would go a lot further than it has in Sydney / Melbourne - and also bring prices here in Geelong down. Then next year when we’ll be looking at getting back in the property market, we might be able to get something reasonable. I know - awful for all those who are currently in the property market…

I know what you mean though, @Orestes - person debt is huge, and when I look at the younger generation, who now live their lives on ZipPay etc… it’s quite terrifying. Those “services” are criminal in my opinion… and expanding the mentality that you can just buy now, pay later for your entire life.

(I’d call a car loan a bit different to getting a loan to buy a pair of shoes…)

#9

It has got a way to go yet, we’re in a bear market, they’re just crowing about any opportunity that the market has stabilised itself for more than 30seconds. I would not be buying anything right now and I’m about to have a bit of a windfall as my mother downsizes and we get a small amount of cash. At this point I’m considering converting it to gold or something more useful such as stocks e.g. something collectible like a Porsche 964 or something lol…

Zip Pay, After Pay, and GE is criminal for so long as you can’t pay it off within the 0% terms and that’s the only terms you should use that type of finance on. I might be boring but I can guarantee you I’ll be one of those people that retires with more than $1million in capital when I retire and be fully funded for my retirement.

A hard upbringing teaches you that frugality of life.

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#10

I should have listened to my mother. And not become old and sick.