Comprehensive Credit Reporting – What You Need to Know
Comprehensive Credit Reporting (CCR) is here, and most Australians are unaware of how it can affect their ability to get finance and that it will change the way their credit score is calculated.
Historically, Australian credit reports only included negative information such as defaults and bankruptcies but with the introduction of CCR additional information will now be included such as the types of credit facilities a person holds as well as payment history and account conduct. The proposed outcome allows credit providers to make better lending decisions by being able to identify those customers struggling with their current commitments. However, they will also be able to identify those applicants that display sound conduct and assess their applications accordingly.
Moving forward credit provider will be able to see:
- When a credit account has been opened/closed or the start of an existing or past loan and when it was repaid
- The type of credit facility (i.e. mortgage, credit card, personal loan etc.) and the available limit
- The last two years repayment history.
This information will not only assist credit providers in assessing the risk of a potential client but will also help determine if they display positive financial conduct. This change will potentially reward customers for good credit history rather than being penalised for an isolated missed payment that may have appeared on their credit record.
The big four banks (NAB, CBA, Westpac and ANZ) have been required to share 50% of their customers’ credit data since 1 July 2018 with that now moving to 100% by 1 July 2019. All smaller lenders are expected to follow in due course.
Know Your Credit Score
Your credit score is a numerical representation of your credit history, with the higher the score, the better. It’s important to know your credit score to ensure it’s as clean as possible when you are seeking finance. If you do have a ‘black mark’ on your file, it’s probably wise to wait until it lapses before applying for a new credit facility or look at getting it removed if possible.
To ensure your credit score is always in top shape remember to:
- Pay your commitments on time
- Do not over extend yourself
- Limit the number of credit applications you apply for
- Monitor your credit file and alert the relevant credit providers or authorities should you discover an error.
The introduction of CCR does not signal a negative change. Ultimately, we may see improved access to credit along with potentially better interest rates. Countries such as the USA, New Zealand and the UK have all adopted a “risk based” pricing structure where consumers have access to lower priced financial products based on their solid conduct history. This could therefore mean a welcome change in being able to access finance a little easier for those with a positive financial history.
For more information on the CCR, contact the Blackburne Mortgage Broking team.