Are you ready for comprehensive credit reporting? From 1st July 2018, all of Australia's big banks are required to provide more information about their customers' spending and saving habits. This allows lenders to see a more detailed account of your credit history, both positive and negative.
While comprehensive credit reporting (CCR) could help those with good credit to secure better rates and terms on loans, those with bad credit may find applications more difficult. Here's what borrowers need to know about the new regime.
What's changed?
Your credit report is a catalogue of your financial habits that's collected by credit agencies. This report is provided to lenders when requested to help them decide whether to offer you a personal loan, credit card or other form of debt, and on what terms.
Before CCR, credit reports in Australia only included the basic information that was most important for lenders to know, such as missed payments longer than 60 days overdue and bankruptcies.
Under the new scheme, lenders have access to your full payment history for all your loan and credit accounts, including details of missed payments after just 14 days as well as other financial information.
Who benefits?
More transparency isn't always a bad thing. In fact, CCR is advantageous for those with a good credit history, as lenders are now able to see the positive as well as the negative.
If you always keep up with your loan and credit card repayments every month, lenders can see that you're reliable and not likely to be a risk. This could lead to them offering you a lower interest rate or more competitive terms, and you'll have a wider range of options to choose from.
If you don't have a long credit history, a comprehensive credit report showing positive financial activity could also improve your chances of being approved for a mortgage or other loan that you may previously have been declined.
Who could suffer?
On the other hand, CCR could have a negative impact if you've struggled to keep up with payments in the past, been declined loans and credit cards or have inconsistent income due to losing a job or other circumstances.
Some lenders, especially the big banks, could see this activity as increasing your risk of defaulting on a loan. This could make you ineligible or only able to access services at a higher interest rate.
How can I improve my credit report?
If you're worried about how these changes have affected your credit report and what lenders can see, you should talk to a financial adviser. They can explain exactly what will and won't be included on your report and offer advice about how to improve it.
You can access your credit report for free once a year by contacting one of the three credit reporting agencies: Veda Advantage, Dun and Bradstreet or the Tasmanian Collection Service. This will show you any areas in need of improvement, which you can start to work on right away, such as making payments on time.
Where can I get help?
If you have bad credit and you're finding it difficult to borrow money from the big banks, Debt Fix could help you.
Call us today on 1300 332 834 to speak to our friendly team.