Credit File ‘Gotchas’

Almost all who need finance for medical equipment will have ‘clean’ credit histories.  In fact, I’ve had only one for whom their credit file had an issue.  But, as a broker for personal loans, I have encountered several cases of credit file problems, some of which are minor and easily fixed.

‘Footprints’ in your credit file are mainly placed by credit providers in response to an application for credit, and it doesn’t matter if the credit was or wasn’t approved.  Because some lenders don’t like to see a lot of credit enquiries, it’s a good idea to use a broker to help you decide on the right lender, rather than making multiple applications.  Also beware the convenience of making credit applications online.  Other sources of footprints are failure to pay or late payments on a commitment, defaults, judgments, directorships, and court actions, even if resolved in your favour.

All footprints remain for five years, so it’s a good idea to check your file periodically.  If you find something inaccurate or trivial (i.e., late phone payment), there are services that specialise in cleaning up credit files.

RBA’s Rate Increase and Medical Equipment Finance

The 0.25% increase in the cash rate last week will have limited effect on finance for medical equipment.  The fixed term – fixed rate facilities that are typical for asset finance change weekly and, unlike variable residential mortgage rates, are independent of the Reserve Bank’s monetary policy.  There was, however, upward pressure on the 90-day bank bill rate, which rose by 12 points since last Monday.  Three and five year term deposit rates were mostly unchanged.

It’s easy to form the impression that an RBA increase will mean higher interest rates for all forms of finance, but lenders tend to ‘factor in’ anticipated rate changes a little at a time based on their cost of funds, individual perceptions of general trends, and strategies regarding market share.

Level the Playing Field Among Banks

Clancy Yeates wrote in last Saturday’s SMH about three ways to level the playing field among the banks.  If the federal government were serious about competition for the big four, as was the case before the GFC, they could:

  1. Extend the support for Residential Mortgage Backed Securitisation.  Yeates wrote, “A proposal from the shadow treasurer, Joe Hockey, to extend the government’s credit rating to AAA-rated mortgage-backed securities is worth taking seriously. Banks already enjoy an implicit guarantee on their borrowing, after all.”
  2. Provide clarity about the bank deposit guarantee. “The government will review the guarantee next October but it is not clear what they will decide, and this uncertainty works against small lenders. As long as this remains up in the air, many savers cannot help but imagine their money is safer with the big banks – giving the majors another advantage over the smaller players.”
  3. Make it easier to switch banks. “The government is trying here, and unveiled a ”bank-switching” package two years ago. But the latest documents from July showed only 35 people a week had signed up to the scheme – a tiny share of the nation’s customers.”

The big four have had a dream run through the GFC, setting a ton of record profits, despite quite a few write-offs.  They continue to make it difficult for SMEs, so why not help the smaller lenders compete for that and other markets with the changes above?