From July 2018, comprehensive credit reporting (CCR) becomes mandatory, and banks will be forced to share detailed positive and negative financial history with other lenders. The new credit reporting changes will provide a fuller, clearer picture of your credit history, and could make it easier – or for some people, harder – to get credit or a loan. Here’s what you need to know.
What is CCR?
Comprehensive credit reporting means your credit report will contain far more information that could affect your ability to borrow money or get credit. Prior to the change, most lenders only shared negative information about borrowers, like credit applications, defaults, overdue payments, bankruptcy and court judgements.
Under the new system from 1 July 2018, lenders will also have to share positive information such as a history of making regular repayments, repaying a loan early, or closing unused accounts.
The core objectives of CCR are to improve the depth of information available between lenders and borrowers, improve competition between lenders, and improve access to and reduce the cost of credit for creditworthy borrowers.
How is info being shared between lenders?
Major banks are now required to share 100 per cent of credit data with credit bureaus like Equifax and Experian, who in turn will list it on your credit report. While only the four major banks (NAB, CommBank, Westpac and ANZ) are required to share this data, it’s likely other credit providers will also share data to remain competitive.
Credit providers will use your credit report or credit score, any information you provide during the application process and other details, to determine if they will lend to you, how much and on what terms.
What’s my credit score?
The scoring relates to six number bands which you could fall within depending on your activities. They are:
Excellent = 833 to 1200
Very Good = 726 to 832
Good = 622 to 725
Average = 510 to 621
Below average = 400 to 509
Poor = 0 to 399
Many borrowers could see their credit score increase due to the extra information being shared by financial institutions, potentially making it easier to leverage a better deal from lenders. The converse of course, is those borrowers with an already low credit score could find it even harder to apply for credit.
How does CCR affect me?
If you’ve been paying off your credit card and loans on time, this will count towards your score as you’ve demonstrated the ability to responsibly manage debt. This could mean a better deal when it comes time to refinance or apply for a loan: a more favourable interest rate or a repayment schedule tailored to your unique circumstances.
With a clearer picture of your financial health, credit providers are in a better position to see if you should be given credit. A poor credit history will be far more obvious, and you may not be approved for credit or simply find it much harder to obtain credit.
But all is not lost. Under the new system, if you pay off your overdue payments and continue to pay your debts on time, credit providers will also be able to see that you are now managing your loans better and could consider you for credit possibly even with better terms.
As always, ensure your bills are paid on time, set up automatic payments to help manage this. Be mindful about constantly switching credit card providers. Notify your lender and utility companies immediately of your new address if you move home, and only apply for credit when you really need it after doing thorough research into your options.
For advice or to better understand this new way of credit reporting, get in touch with your Mortgage Express broker.
Check your credit score here:
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Credit Ombudsman Services Ltd (COSL) | Member of Choice Aggregation Services.