Many people are unaware of Comprehensive Credit Reporting and how it affects them.
Currently when you apply for a home or investment loan, Lenders obtain a Credit Score (Rating) from one of four licensed Credit Agencies.
If your Credit Score is poor, it can be difficult to access the finance you need.
Until recently, the data collected by the Credit Agencies focussed on negative events – or their absence.
Many consumers & businesses were disadvantaged under these arrangements, the Credit Reporting revealed only a small portion of an individual’s credit profile!
What is Comprehensive Credit Reporting?
When Comprehensive Credit Reporting was originally introduced in 2014, participation was voluntary. However, in November 2017, the Federal Government announced it was to be mandatory for the Big 4 Banks.
Under the new legislation, the major Banks are now required to provide more comprehensive picture of your overall credit history.
This is important (& a positive for borrowers) as it will give credit providers a better understanding of your risk profile.
The legislation required the Banks to share 50% of their credit data with Credit Bureaus by 1 July 2018 and 100% by 1 July 2019.
How is Comprehensive Credit Reporting Different?
In the past, credit reporting focused on:
- Credit Enquiries
- Late payments – Overdue consumer credit account details
- Events of default
- The credit provider details
Under the new legislation, the Banks will now also share information on:
- When the account was opened & closed
- The type of credit
- The credit limits
- Monthly repayment history for the past two years
Benefits for borrowers
Comprehensive Credit Reporting offers a number of benefits for borrowers with a good credit history:
- They are likely find it easier to access finance
- As Lenders can see the type and size of facilities you have had in the past, it will provide comfort and assist decision making
- Those who previously were unable to access mainstream funding due to a lack of credit information, may also find it easier to access finance
- As Banks, and the market, move more towards pricing for risk, those with a good credit history are likely to be advantaged
Comprehensive Credit Reporting will help lenders make more informed credit decisions.
This has the flow-on potential to reduce defaults and by extension bad debts.
Understand your Credit Report – it is a valuable asset!
As we move forward with Comprehensive Credit Reporting it is important to:
- Understand what your Credit Report contains
- View it as an important asset that needs to be protected
- Recognise in future it will likely be something that can be leveraged
How to access your Credit Score information
There are currently four licensed Credit Bureaus in Australia:
- Equifax (https://www.equifax.com/personal/)
- Experian (http://www.experian.com.au/consumer-reports)
- Dun & Bradstreet (http://dnb.com.au/)
- Tasmanian Collection Service (https://www.tascol.com.au/)
By providing some identification documentation, you are able to obtain your free Credit Report from the Credit Bureaus.
If you believe the information held by the Credit Bureau is not correct, you can contact them, (or the Financial Institution that provided the information) and request a review.
Overseas experience with Comprehensive Credit Reporting suggests it holds benefits for both borrowers and Lenders.
The main benefit is that it provides Lender with a more comprehensive picture of an applicant’s credit history – not just focusing on negative events as has been the case in the past.
For those with a good credit history, it should make accessing finance easier and in time, lead to pricing differentiation.
If you would like to learn more about how Comprehensive Credit Reporting influences your Home or Investment Loan Application, don’t hesitate to give me a call on 0421 304 990