Comprehensive Credit Reporting (CCR) is being implemented in Australia by the ‘Big 4’ banks in a two-stage process. Big 4 banks had to share at least 50% of their credit accounts, both positive and negative, with credit bureaus since July 2018, and will be required to provide the remaining 50% by September 2019 (due to a delay in the legislation). Requiring banks to report more data means that positive credit information will be included on your credit report. This means that lenders will have a more comprehensive picture of consumers and this could bring additional benefits. It is also likely your credit score will change more regularly with CCR due to the additional information being supplied by banks to credit reporting bodies such as Equifax.
Why does this matter?
Let’s say you apply for a mortgage or a new credit card. The credit provider will do a background check to assess the risk i.e. to make sure that you are likely to repay any credit they extend to you. As part of this, they will ask a credit bureau, such as Equifax, to give them a copy of your credit report. In the past, these files only included negative information, such as defaults or missed payments, which gave them a pretty limited view. With more positive information, lenders will have a much more complete view of your financial situation. They are therefore more likely to extend you credit or may even offer you a better deal.
What is Comprehensive Credit Reporting exactly?
Comprehensive credit reporting (CCR) is positive credit reporting. It introduces the reporting of data that reflects positive credit behaviours. Giving lenders richer and more accurate data about all of your credit behaviours and history allows them to more accurately assess credit applications. It also better enables them to match the credit they offer you to your particular needs and circumstances. With some lenders you may be rewarded for a good credit score with a lower interest rate, for example.
What are the benefits?
These government-led changes are intended to benefit consumers. In the past, Australia had a negative credit reporting system, meaning that only negative credit events, such as defaults or failing to repay a debt on time, made it onto your credit report.
Now your credit report will give a fuller picture of you – showing both the good (i.e meeting monthly loan repayments on time) and the bad (missing monthly loan repayments). This means if your report is full of the good a lender may be more inclined to offer you the credit you applied for, as they know you’ve been paying all your repayments on time.
How will it affect my credit report?
With more data, your credit score may change. Positive credit behaviours – such as meeting your monthly loan repayments on time – can positively influence your credit score. Consumers may have already started to see changes to their credit score as some of the data has been slowly shared by lenders since July 2018, the remainder of the information will be reported to credit bureaus by end of September 2019.
While only the four major banks (NAB, CommBank, Westpac and ANZ) are legally required to share this data currently, other credit providers are likely to follow suit within the same time frame in order to remain competitive.
What kind of new information will be on my credit report?
In the past, the information that made it onto your credit report was largely around negative credit events, such as making credit enquiries, defaults or serious credit infringements such as unpaid debts. The new information being shared for CCR includes things such as dates when accounts are opened and closed, the types of credit you have, your credit limits, and up to 24 months of repayment history information.
Do I need to do anything?
Nope. The changes may take some time to flow through the system, but no action is required on your end. It is, however, a good idea to monitor your score closely and check your credit report regularly to see the changes and make sure all of the information is accurate.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
Original article found here.