Risk Pricing is entering the Australian Lending market; making it more important than ever for borrowers to be aware of their credit rating.

Risk pricing is a policy of lending whereby applicants with the best credit score get the best interest rate. Similar policies have been used in insurance; especially car insurance, in which better drivers are awarded with lower premiums.

Competition between the established lenders is already fierce. But new players are entering the market, the most significant of whom are peer-to-peer lenders. Already major players like Citibank have been forced to cut their mortgage interest to 3.9 per cent – for their best borrowers. It was either that or lose them.

The consequences of this are that borrowers need to be aware of their credit rating before they seek out a loan. Knowledge is power, especially when it comes to negotiating.

Recent figures say that about 80 per cent of Australians have never checked their credit history.

Consumer credit agencies Veda, Dun & Bradstreet, and Experian offer credit history checks and ratings for free. The process can take up to 10 days, but may be done the same day for a $70 fee.

Spokeswoman for Veda, Belinda Diprose said, “We would expect over the next 12 months more lenders will follow suit.

“It’s really important for people to understand what’s on their credit report and what is their credit score so they can be in a position to take advantage of these new offers.”

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