We live in the world of Credit Ratings otherwise named as Credit Scoring; everyone is rated for credit worthiness in this World, from Countries to individuals.
Providing credit and repaying the debt always takes into account the credit worthiness of an entity. You are more likely to get credit from a Bank if your credit worthiness is high.
Veda Advantage introduced VedaScore from 1st August 2011 – A credit risk management tool which assists credit providers to know and better analyze the individual score of a particular client. What it essentially does is that it simulates the information of a client into a single score thereby helping the decision making of credit providers using a threshold. For example a credit provider like a Bank will only provide credit cards to clients only with a score over 800 out of the required 1200. What it means for them is that the client is less risky for a particular bank to deal with.
The changes to scoring is essential not only to protect the credit providers but extremely important under the current legislation changes following the GFC, every Credit Provider in Australia needs to comply with responsible lending legislative requirements under the National Consumer Credit Protection Act (NCCP).
Another important significance is the impact of the score on the interest rates, anyone with a low score will be more likely to be termed as high risk client thereby a perfect candidate for a high interest bearing product in comparison to a client with high scoring client. The major difference is the availability of credit providers, for example Person E with a score of 1100 there are 30 credit providers to choose from whereas for a Person A with a score of 300 there are 3. The more you got to choose from the better deal you will have.
To end this discussion, I want to present you with a simple yet realistic data:-
|
Name |
Score |
Personal Loan Rate |
Lenders to Choose From |
Risk Category |
|---|---|---|---|---|
|
A |
300 |
30% |
3 |
Highly Risky |
|
B |
550 |
26% |
6 |
Risky |
|
C |
750 |
21% |
10 |
Moderate |
|
D |
900 |
14.50% |
21 |
Stable |
|
E |
1100 |
13% |
30 |
Excellent |
If you do have a lot of Bad Debt such as credit cards, personal loans etc.. and have minimal equity and savings and are struggling to keep up repayments – give Debt Negotiators a call on 1300 351 008 and we can help you to consolidate and pay off these debts with one easy payment.
