Comprehensive Credit Reporting and why it’s important now

‘Credit check’ is a term that can make
some people feel nervous, especially if they have had a, shall we say, ‘chequered’
credit history. You may have heard Australia is switching
to a comprehensive, or positive, credit reporting system. So, what does that mean and how could this
news potentially impact you? We’ll start by looking at the old reporting
system – Australia had a ‘negative’ credit reporting system where lenders (like banks,
credit unions or a mortgage broker) based their assessments of whether to lend money
or give credit to a potential borrower solely on whether they had any negative reports in
their credit history, such as missed bills or other loan repayments, defaults or bankruptcy. The new system, comprehensive credit reporting
or ‘CCR’ was introduced by the Government in 2014 and will become mandatory for lenders
to adhere to in July 2018. It is intended to allow lenders to better
assess risk using a fuller picture on potential borrowers’ credit history. This includes information about the current
accounts they hold, what accounts have been opened and closed, the date they paid their
debts after receiving default notices and how well they meet their repayments. The information will be used to decide whether
to lend money, how much they will lend and may sometimes influence what interest rate
is offered, meaning those with more favourable credit histories who pose lower risk to a
lender may be in a position to secure a more competitive deal. This system could help people who have the
means to take on a loan but may have had a few blemishes in the past, such as missing
one or two payments, to get approval for finance, where previously they may have been denied. So, what exactly will happen on 1 July? You see, although CCR was recommended in 2014,
some financial institutions have been sluggish to adopt it. This led the Government to impose deadlines
– the big 4 banks must provide 50% of their credit data to credit bureaus by July 2018
and 100% by July 2019. So you may notice a change in your credit
report once this data has been provided. Basically, CCR could be a positive step for
many consumers as it will likely make it easier for them to demonstrate financial accountability. Some of the possible pros include:
 Comprehensive reporting gives lenders a fairer, fuller picture of a borrower’s
credit worthiness  Recording positive borrowing behaviour
could balance out any previously recorded negative slip ups such as a missed payment
 Credit scores are less likely to be significantly impacted by one single negative event – it
would take repeated missed payments or general pattern of credit stress to impact a borrower’s
credit rating. One thing that hasn’t changed under CCR
is when assessing your credit worthiness, lenders will look at how often you’ve applied
for credit and how much credit is available to you. Even if you’ve got a low balance on your
credit card, it’s the maximum available limit you could spend on the card that you’ll
be assessed on. If you intend to apply for a credit card or
loan in the near future, it’s typically a good idea to consider consolidating any
credit cards or loans into one and reduce any unnecessary credit card limits. The good news is CCR will not only record
when you apply for credit and loans, it will also record when you pay off and close credit
cards or loans. Under this new credit reporting system, there
are a number of steps you can take to possibly help you improve your credit score, including:
– Pay bills and make credit and loan repayments on time
– Regularly check details held by credit bureaus by obtaining your free credit file each year
– Pay off outstanding loans and credit card debt
– Maintain low or no balance on your credit card
– Lower your credit card limits – Consolidate multiple personal loans and/or
credit cards Remember – the comprehensive credit reporting
system is largely seen as a positive step for consumers and lenders, encouraging responsible
lending practices, and enabling consumers to build a more comprehensive and positive
credit report that could help them get a better deal from their chosen lender.

2 comments on “Comprehensive Credit Reporting and why it’s important now”

  1. Jeffrey Goulet says:

    I wasn't always in the position I am in today. In 2017 I was almost $10,000 dollars in debt, had a credit score of 400, and I was working for minimum wage as a janitor. Being in debt is like a magnet that makes you feel like you are stuck at the starting line. It’s been a long road to get to where I am now. Until i met with a hacker online who gave me a new life. I am so grateful to him, incase someone might need the service, You can reach thi s mail or tex t (COMPUTERSPYEXPERTS at GMAIL dot COM) or (8 5 9) 7 8 0 – 3 7 7 9

  2. fatassdork says:

    more competitive deal my ass. more like kill my borrowing capacity.

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