Very recently, the Federal Government announced that laws will be introduced to mandate Comprehensive Credit Reporting in 2018.
Before we get into specific details about what Comprehensive Credit Reporting is, if you need to know anything, it is that lenders will have more data about your financial activities than ever before.
What is comprehensive credit reporting?
Comprehensive Credit Reporting, sometimes also referred to as Positive Credit Reporting, is a new financial credit reporting system that will give all financial institutions, including the big banks and smaller lenders, detailed information about a borrower’s credit history. Comprehensive Credit Reporting already exists, however lenders are yet to integrate this into their systems for credit applications.
The Federal Government’s announcement to mandate Comprehensive Credit Reporting means in 2018 it will become law for lenders to use CCR information when they assess applications for credit cards and loans.
How does credit reporting currently work?
Most people have a credit report. Currently, credit reports that banks and lenders use to assess finance applications include only ‘negative’ information. Negative information includes:
- Credit applications (but not the outcome)
- Overdue credit debts
- Defaults
- Bankruptcy
- Court judgements
The information contained is then calculated into a credit score. That score is used by a lender to assess the risk involved when lending money to individuals.
What will be different when comprehensive credit reporting is mandated?
When Comprehensive Credit Reporting becomes law, lenders will then be able to access both ‘Positive’ and ‘Negative’ information on your credit file. Negative information was discussed above. Positive information includes:
- The outcome of credit application (approved or rejected)
- Opened accounts
- Closed accounts
- Defaults payment dates
- Credit repayment history (Whether you pay your loans, credit cards, and other credit products on time or late)
- Type of account and name of credit providers
- Balance of credit and owing amounts
When implemented, ‘Positive Credit Reporting’ will also be included when your credit score is calculated.
What does this mean for you when you apply for a credit card or a loan?
Comprehensive credit reporting aims to provide a more balanced view of an individual’s financial position. For people with bad credit who have not made attempts to improve their credit health, Comprehensive Credit Reporting may give lenders more insight into the risks involved with lending to them.
However, for individuals making progress with improving credit health, Comprehensive Credit Reporting may allow them to demonstrate good habits to lenders. This may be beneficial during their application process.
These are our top tips to improve your credit health:
- Know your credit score – you can get this for free. Search online or ask us how.
- Only apply for finance if you really need it and after you have researched options. Using a broker is a good idea, they will look on your behalf.
- Break the habit of making late repayments. It happens from time to time, but the more times you pay your bills late, the more it affects your credit score negatively. Direct debits are a good idea.
- If you are experiencing financial hardship, speak to your bank or a broker as soon as possible as you may have more options than you think. Occasional missed payment or repeat missed payments may limit your choices in the future.
- Always keep your personal details such as your address up to date, this way you can avoid unnecessary defaults and collections demands.
- Get as much advice as possible. Information is free. There are literally 100’s of finance options. Some lenders specialise in certain areas such as bad credit, or self-employed loans. The more information you have, the better your chance of getting approved for a competitive rate. Research online and talk to a broker.
For more information, you can ask our team! Chat with us live, email us info@whitestar.com.au or call 1300 652 842.