Rate-chasers are unwittingly sealing their own fate.

In an extremely competitive environment, as a consumer, we all know that there are a multitude of options to choose from nowadays. We've been taught, if we want a better deal with our mobile phone, internet, gas, electricity or car insurance we simply compare and switch to a better deal.

When it comes to home loans or investment loans, you don't have to look very far to find an advert in a magazine, online or on the radio or TV telling home-owners to compare and switch their home loan to a better rate, right? However, those chasing a better rate could be unwittingly sealing a fate far worse than they might realise.

'Rate-shopping' for the best mortgage or credit card is possibly the quickest way to destroy your chances of securing the best mortgage or even getting a mortgage approval at all. Many home owners have enjoyed accruing a large amount of equity in the property/s over the last few years, especially in Sydney and Melbourne. Many have decided it's time to look at utilising some of this equity to consolidate a few credit card and/or personal loans to free up some cash-flow for Christmas & New Year festivities or to purchase their first or next investment property. Some have simply decided its time to get a sharper interest rate.

If your clients tick one of more of the boxes above, then they could be at risk of very quickly ruining their credit score. The real issue is, more than likely, they don't know why or have even realised their fate until it's too late - at the time of receiving a decline for their mortgage refinance.

Recent statistics by Australian Credit Bureau Veda has suggested nearly 3 million Australians are at risk of credit defaults. This sentiment is also supported by Credit Repair law firm, MyCRA Lawyers Founder Mr Graham Doessel who has been echoing these statistics for quite some time.

'Many individuals don't realise they can legally access their own credit scores for free each year' says Mr Doessel.

'...but even worse than this, far too many Australian's don't realise that most lenders can instantly 'auto-decline' your mortgage application if you unwittingly just made as little 2-3 credit enquiries in 6 months or just 6 credit enquiries within any 12 month period. I've seen too many individuals get trapped by this... in the worst cases - not be able to get any reasonable sort of finance for up to 5 years just from one seemingly small but costly mistake, Mr Doessel said in a recent phone interview.

Mr Doessel urged consumers to be aware of their rights as well as the consequences of not knowing about their credit position. You can access your credit file for free once a year from all the Australian credit bureau's at www.freecreditrating.com.au.

The take-away nugget from this is for you and your clients to be fully aware of their personal (and business) credit scores each year and to only proceed with a mortgage application once they have conducted their initial research and are comfortable with their professional consultant - YOU! As a financial services professional, clients need to be warned against speaking to more than one finance consultant, or worse still, making a variety of credit enquiries (including credit cards, personal loans, mobile phones, and even utilities connections) in a short time-frame. Home-owners should ensure they have accessed a current copy of their own credit file which they can send to any consultant/s to enable then to give their best quote without accruing multiple credit enquiries on their credit file.

You should communicate these concerns clearly to your clients. They too must ensure their communication is clear and precise to advise all third parties: 'I do not wish my credit file to be accessed until I have given authorisation in writing to proceed to an application for finance and approval. You should make it your responsibility as a finance professional to teach your clients to space out their credit enquiries and to stay within the safe credit policies to ensure they don't get caught out.

You can find more information about MyCRA Lawyers and protecting your credit score at:

www.mycralawyers.com.au

MyCRA Lawyers is an Incorporated Legal Practice, focused exclusively on the legislation surrounding credit reporting to assist our clients in the area of credit file consultancy and credit disputes. We mean business when it comes to helping those disadvantaged by credit rating mistakes.

About the author:

John Maxwell is Founder and Senior Finance & Business Strategist at Cocalex Consulting. John Maxwell has over 15 years experience in the financial services sector, and has owned and managed 9 mortgage franchises. He has particular focus and passion for: Leadership Training and Development, Franchise Development and Business Networking.