06 Mar Know the Score – Comprehensive Credit Reporting
Big changes in the way lenders view our credit histories are transitioning into place.
In March 2014, changes to the Privacy Act 1988 came into effect to allow for this inclusion of extra information about your credit history in your credit file. The move across to Comprehensive (Positive) Credit Reporting (CCR) was optional, but following limited take up by financial providers, in late 2017 the Australian government announced it was making CCR mandatory. This required that big four banks have at least 50% of their positive consumer credit data provided to credit bureaus by the 1st of July last year. They will then be required to have all of it reported by 1st July 2019.
Smaller lenders will need to start reporting fully to benefit from receiving the data.
What has changed?
The new categories of information included in your credit file under Comprehensive Credit Reporting include repayment history information and consumer credit liability information. Repayment history information includes:
- Repayment history for credit accounts such as credit cards, home loans and personal loans
- Whether you have made a payment or minimum payment required
- Whether the repayment was made on time or not
Your repayment history is stored on your credit file for two years. Only your repayment history from licenced credit providers who hold an Australian Credit Licence can be recorded. The good news is that teleco and utility companies are not licenced credit providers, so your repayment history will not include these providers and they will not be able to see repayment details either.
Consumer credit liability information includes:
- The type of credit account opened
- The date the credit account was opened and/or closed
- The name of the credit provider and whether they are a licensee
- The current limit on the credit account
What does it mean?
Comprehensive Credit Reporting means that a more complete picture of an individual’s credit profile can be held on their credit file.
People demonstrating good credit-based behaviour (paying debt on time, not over limits) will now see that reflected on their file and credit score. It will allow people to take greater control of how they can be perceived by potential lenders reviewing their credit file. The good news is if you have had issues in the past it could allow people to recover quickly from adverse situations or to establish a credit history more quickly.
We are now slowly seeing risk-based pricing structures coming in with some lenders adopting this for credit cards and personal loans. These practices are well established in other markets such as the US, UK and New Zealand who already have this type of reporting in place.
For lenders and financial institutions, it should ultimately result in more informed lending decisions, leading to fewer outstanding debts and less defaults. It may also present the opportunity to develop new lending processes and product offers to market.
It will take time for all lenders to switch across, so additional information may not appear on your credit file if your credit provider has chosen not to share this information with credit bureaus yet.
You can contact your credit provider if you are unsure whether they have adopted CCR or if you want more information about their credit reporting practices.
What can I do?
As more credit providers opt in to CCR, it has never been more important to stay on top of your finances.
You can ensure you maintain a good credit score:
- Set up direct debits to help ensure bills are paid on time
- Be careful about constantly switching credit card providers
- Notify your credit providers of your new address when you move
- Research thoroughly before applying for credit and only apply when you really need it
- Protect your identity from fraud
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