Do you know your Credit Score?
No? Well your bank manager does, and countless other agencies who deal with your bank finance, credit cards and other personal debt. Knowing your credit score can help navigate your way to a cheaper interest rate on your home loan or other finance products. The higher your score (over 750) means the better risk you are and therefore, the better interest rate, you are able to negotiate.
If you have a low score you need to know how to go about increasing it if you plan to apply for finance. If you google “My Credit Score” you come up with a myriad of options and most of them require you fill in annoying questions and divulge personal information. Best to stay with the main company dealing with personal credit which is VEDA.
Peer to Peer Lending
Another area, where knowing your personal Credit Score will come in handy, is in the rapidly growing sector of peer to peer lending. Some industry insiders consider this to be the main sector to cause trouble in the future to the dominance of the big four banks.
Peer to Peer lending is where you, if you have a few thousand dollars you are ready to punt, and you, the other guy who wants to borrow money, get together and do a deal. There are a number of websites set up as a broker and playing the middle man to this arrangement. Both sides of the deal use the borrower’s individual Credit Score to set the rate. With the current spread of only a few percent being offered by the banks on deposit and the 18% plus being charged on your credit card rate there is a lot of room to move. The main lender in this space is Society One.
The present cosy arrangement between the government of the day (either of them) and the big four banks is to the detriment of your own pocket as well as promoting a healthy environment for market competition in the finance sector.
Recently the big four banks, at the apparent request of treasury, increased the rate for interest only loans. This was apparently done to take some of the heat out of the southern city property market. Although a number of levers and options were available, this one was the most effective to give a quick uplift to the banks bottom line.
On another front, the onerous compliance and reporting requirements for independent brokers has nothing to do with consumer protection but lots to do with maintaining the big four’s dominant market share.
Other insider gossip suggests that if the next rate movement is down, the banks, led by the CBA have an agreement not to pass on any reduction to their customers. A monopoly is still a monopoly even when there are four entities doing it.
Interest Rates on Hold
As it happens, today the RBA has left the cash rate on hold at 2% for the month of September.