Westpac - not sure if I should laugh or cry

[Rob Williams]

Westpac (more specifically, their computer system) rejected my loan application for a re-fi loan on Friday.
Yet, one week earlier, I settled another re-fi loan with them.
I've been told that there's been a policy change and that if the computer system rejects the loan, even if a loan manager has no issue with the application, they can't over ride the computer system.
On making further enquiries, I was told that the computer system assigns scores to various factors such as length of employment with current employer, length of time at current address, credit history and the number of hits on my CRAA file.
This is where it gets interesting, according to the Westpac contact ... the only thing that's changed since the last loan application and this one is that there is now one extra hit on the CRAA file. But, the computer system isn't smart enough to figure out that it was THEM who put it there when they did their credit check for the last loan.
Or maybe it's like Terminator 3. The Machines are taking over!

 

[Finn.]

Wasn't it Westpac that recently had that advertisement campaign all about how they were bringing back the branch manager who was allowed to make decisions? Or maybe that was national. I don't know, I don't pay attention to ads, but it was definitely a bank with red and white in their logo.

 

[marg4000]

Sounds like the routine "computer error" excuse that is trotted out with appalling regularity.
Marg

 

[Rob Williams]

Wasn't it Westpac that recently had that advertisement campaign all about how they were bringing back the branch manager who was allowed to make decisions? Or maybe that was national. I don't know, I don't pay attention to ads, but it was definitely a bank with red and white in their logo.

Yep, that's them. They brought back the manager, they just forgot to give them the authority to "do" anything.
Which is the bit that made me laugh, when I'd finished shedding tears of frustration.

 

[HomeBuyAU]

It's pretty bad isn't but also a warning that credit hits can cause problems as I thought. Gosh, I had about 5-6 with my last application with just 2 banks about 3-4 months ago so I hope my next loan in a few months won't hit a brick wall. I'm not sure how long it takes for the hits to clear but another reason why I won't use a broker again?

 

[Propertunity]

It's pretty bad isn't but also a warning that credit hits can cause problems as I thought. Gosh, I had about 5-6 with my last application with just 2 banks about 3-4 months ago so I hope my next loan in a few months won't hit a brick wall. I'm not sure how long it takes for the hits to clear but another reason why I won't use a broker again?

Look I would not worry too much about it. For just one loan application you will get a hit from 1) the lender & 2) the mortgage insurer. It is quite common to apply with one lender and if you don't like their deal, apply at another. So that would give you 4 hits at least.

That stuff stays on your credit file for 5-7 years. It is not really a function of using a broker.

 

[Pablo]

Absolutely stupid isn't it Rob, I couldn't believe it when I read about it. Surely they will change their stance on it sooner than later but until then you may need to change banks.

 

[WinstonWolfe]

Gee, you'd think they had a problem finding funds to lend at a reasonable rate for reasonable risk.

 

[HomeBuyAU]

Look I would not worry too much about it. For just one loan application you will get a hit from 1) the lender & 2) the mortgage insurer. It is quite common to apply with one lender and if you don't like their deal, apply at another. So that would give you 4 hits at least.

That stuff stays on your credit file for 5-7 years. It is not really a function of using a broker.

5-7 years is quite awhile. My hits went something like this:


first application for 350k on IO (approved for P&I & Not IO) with bank1
2nd application for 300k on IO (approved for P&I & Not IO) with bank1 ( won't count as hit as lower amount)

3nd application for 220k on IO (approved for IO) with bank2
4th application for 230k on IO (approved for IO) with bank2

5th application for 230k on IO (approved for IO) with bank1 ( I did this myself as it looked like the other bank was not going to make deadline & by then I had so many hits it didn't matter anymore) although went with bank2 in end as they made deadline by 1 hour.

So all up it was 4 hits I think with 2 banks. It worked out all right in the end as it was quite a good package and I found a nice unit for 220k but still I think people need to be careful of hits like this and I was only made aware it could cause damage to my file when it was too late.

I asked the bank about it and if the same application is used and you are asking for less than first requested then it won't be a hit.

 

[Token Funder]

It's the joys of credit scoring engines - a topic I've highlighted before, including the fact that banks have been quitely moving there acceptable scorebands up for some time. In your case Rob, it's worth noting that you may have been quite close to a notional cut-off score before, but this has pushed you over.

I should also point out that they are better at picking likelihood of default than the credit guy....

 

[Pablo]

Its actually something Westpac have just introduced, and became effective from last Thursday (4/2/10).

You should of hurried things through a bit quicker.

 

[Rob Williams]

It's the joys of credit scoring engines - a topic I've highlighted before, including the fact that banks have been quitely moving there acceptable scorebands up for some time. In your case Rob, it's worth noting that you may have been quite close to a notional cut-off score before, but this has pushed you over.

I should also point out that they are better at picking likelihood of default than the credit guy....

You may be right. But to add to the insanity of it all, the last re-fi has improved my cash flow position quite a bit, so I'm better able to service the next loan than I was the previous one. If they let this one through, I'll be even better able to service the loan.

 

[Spectre]

Perhaps the trick is to resubmit it so the computer doesnt say no and you're dead meat... and find a way for the computer to say 'refer to credit'

Without hammering your cra into next year...

 

[Rolf Latham]

no more refered to credit per se at wesuck

Credit score systems are fickle at the best of times with active investors, but bring in short term wtih that lender and LMI are often you are gone b4 u start

Its fine for credit humans to overlay negative credit to a strong deal at worstpac, but no more positive over ride. if the system says no, its no, regardless if the 17 year old that did the data entry made a boo boo

basically what it means is that in reality we dont need credit people anymore.

ta
rolf

 

[INVSTOR]

basically what it means is that in reality we dont need credit people anymore.

So true, for how long??

 

[Bradsdad]

Yes Westpac just introduced the "do not pass GO" policy if it fails credit scoring. Apparently their credit team has as many brains as those at ING who have been taking this stance for some time.

I had a file refused by ING a while back as it failed credit scoring. The reason was that the client had had 9 (for memory) credit enquiries in the past 18 months. Included with the application was an explanation that there would be numerous enquiries in the past 2 years. The reason being was that she had been buying things at Radio Rentals under the "rent try and buy" thing they had going. Every couple of months she'd pay an item off and then get another. A statement from them itemising each item and verifying all items had been paid for supplied. You thing anyone was willing to look at the information provided? Not even their state manager.
Call me stupid but I don't think this is why credit scoring was introduced.

pS....I actually am a fan of credit scoring and over the years it's certainly reduced bad debts and contributed to the strength of our banking system. For memory after the 1st year ANZ introduced it bad debts fell by 33%. the things is that common sense can't be just thrown out the window.

 

[Rolf Latham]

while we are in the current part of the credit cycle, we will see more stoopid things............just as we saw when we were in the "sales" part of the cycle.

Im fine with auto decisioning, just make it so right across the board, so that we dont have the human element of the Monday vs Friday Syndrome.

Consistency in applying credit policy is a staple for a trustworthy lender...........

ta
rolf

 

[LoanFinder]

Credit scoring is a useful tool , and I agree with it.

What i find amusing is that the decisioning process built in to the credit scoring system is inherently flawed, but this is what is being relied upon as a measure of approval.

Take these 2 instances :

1. Solid PAYG single applicant had been hunting for a new property for a year. Each time they found a suitable one, they had approached a lender for a pre-approval. This resulted in 3 credit enquiries over 6 months.
When property was eventually located, we assessed the best loan options and client chose ING even though they had a pre-approval still in place with NAB.
ING declined application due to credit score and would not manually assess it. Loan was taken to NAB and approved with no problems.

2. Client was a FHOG applicant was recently returned from overseas to live and work in Australia. His employment was short term ( <6 months ) and residential address the same. We applied to ANZ for approval and cited the clients employment as one that allowed him to move and work anyywhere and always be in demand.
ANZ credit score declined the loan, and as he was a new client and not an existing customer, no manual assessment was done.
Took the loan to another lender and it was approved and settled with no issues.

My point is that in each case, there are reasonable and explained reasons that client had that affected a credit score system. In each of these cases, a credit manager that assessed the loan would have approved on the basis of common sense. However, some lenders are not interested in these aspects at present.

So I believe credit scoring has a role, but so too does common sense lending.

 

[Rolf Latham]

Not much money around at reasonable rates for common sense lending though, thats why the lenders are tightening who are what they will lend to.

Its not risk drven per se, but more driven by why lend limited money supply to an increased risk when we need to ration it

Simon. what you have described is actually ONE of the many reasons a borrower should look at an experienced independent broker that doesnt just try and "close" the client with a pre approval as most are trained to.

Understanding the implications of what you are doing with someones CRAA is not well covered covered in ANY of the usual required broker training materials............funny that

ta
rolf

 

[Rob Williams]

Understanding the implications of what you are doing with someones CRAA is not well covered covered in ANY of the usual required broker training materials............funny that

ta
rolf

Good point. Which is why I use the strategist that I do. He's like a chess player .. always looking 2 or 3 moves (loans) ahead and very sensitive to the CRAA issue.
There's a lot more to this game than just finding the easiest service model or the lowest rate. It's a pity those starting out in the game don't realise that. If they did, they would make life a lot easier for themselves in the future.