The New Credit Reporting System
As of 1 July 2018, Comprehensive Credit Reporting (CCR) will provide a clearer picture of your finances to lenders.
More information about your credit history is being given by banks and lending institutions to credit reporting bureaus who will make this accessible on your credit report.
The good news for clients is that CCR will improve your credit score, so if you’re looking to buy an investment property or take out a business loan then now’s the time to do it.
But it also means you need to be wary about applying for, and using credit since there will be more transparency around this for lenders. They’ll be able to see what types of credit you’ve applied for and at what limits. Too many credit applications and high limits could actually decrease your eligibility for a loan.
Below is a list of the data can you can expect to appear on your credit report with CCR:
- Credit type you applied for
- Date you opened your credit accounts
- Credit accounts types you opened
- Maximum credit amount available for each account
- New and previous credit amounts
- Conditions related to your repayment
- Monthly repayments for the last two years
- Date you closed your credit account
- Default agreements details
Why do we need Comprehensive Credit Reporting?
Australia has had an antiquated negative credit reporting system since the 1980s. Times have changed, and lenders want to be able to access more data on borrowers to find out if they’re a good risk or a bad risk for lending purposes. CCR provides both positive and negative aspects, so assessors can get a more balanced view of a person’s credit history.
How Comprehensive Credit Reporting could affect you
Even if you have a few dings in your credit history, under CCR your credit score is less likely to be affected since positive information will balance it out.
There will be more risk-based pricing rather than a blanket interest rate system. This means clients with strong credit histories should be rewarded with better deals and lower interest rates.
Small businesses and people with a limited credit history may also find it easier to access credit than before since more information is being collected under the new reporting system.
There are benefits with CCR even for those with a poor credit history. Just because you may have had negative credit incidents in the past, any efforts you make in the future to change your ways will be reflected in your history and in a higher credit score.
How to prepare for Comprehensive Credit Reporting
Here’s what you can do to clean up your credit report, now that CCR has come into effect:
- Always pay your bills on time – this includes mortgage and personal loans, credit card bills and utility bills. This is important, as lenders will see your repayment history for the last two years and positive repayment history can offset negative incidents.
- Reduce debts before applying for more credit – lenders can see all the credit you have and your limits, so they may be reluctant to approve your application for more unless you can show you’re focused on reducing your debts.
- Don’t open credit card accounts and close them in quick succession – lenders will see the dates any accounts were opened or closed, and doing this too often doesn’t show responsible borrowing. However, if you have credit cards you don’t use it might be prudent to close the account or reduce the amount of your credit limit.
- Check your credit report for errors – Ask your broker to run a credit check on you or simply order a free copy of your credit report from Equifax to find out what information is on your file and what’s your credit score. It’s a good idea to do this before you apply for a loan so you can rectify any errors and understand how a lender may view you as a borrower.
We’re happy to discuss any queries or questions you may have around credit reporting or if you need advice on how to improve your credit score. Get in touch today!