Comprehensive Credit Reporting from 1 July 2018
Back in November 2017, the Federal Government announced that it will be mandatory for the big four banks to provide Comprehensive Credit Reporting effective 1 July 2018. Previously your credit file only showed your ‘bad’ credit behavior. From 1 July 2018, your credit file will show the lot… the good, the bad, and the ugly.
Technically Comprehensive Credit Reporting (CCR) has been around since 2014, but with the Big Four largely refusing to take part, Treasurer Scott Morrison was forced to step in to make CCR mandatory, and is made effective 1 July 2018. The new CCR regime may impact your ability to raise finance (credit) and therefore you should be across the changes.
The new CCR regime will give lenders access to a deeper, richer set of data enabling them to better assess your true credit position and your ability to repay a loan. From 1 July 2018 it will be compulsory for the big four banks to report CCR, however other lenders will follow in due course. For the time being, lenders outside the Big Four can only access your CCR history if they are willing to participate and provide CCR for their own credit customers.
CCR changes apply for any type of credit you take on… such as a mortgage (home or investment), unsecured loans (such as a personal loans and car loans), and any type of credit such as a credit cards, store credit, or goods or services you purchase on credit.
Currently, most lenders only share negative information such as credit applications, defaults, overdue payments, bankruptcy and court judgments. Under the new system, they will also have to share positive information, such as when you made all your repayments on time.
Most credit scores sit between 300 and 750, and a higher score is better. It gives you more leverage to negotiate a better deal from banks, telcos, insurance companies and utilities. Consumers with a low score may find it harder to obtain credit, or they may be charged a higher interest rate.
Like anything, the new CCR will benefit some whilst disadvantage others. Let’s take a closer look…
Good news for some…
If you always pay your loans and credit cards on time (or before the due date), this will count towards your credit health, as it shows that you have the demonstrated ability to responsibly manage your debts.
The great news is that credit providers may be willing to offer you a more competitive interest rate, or a repayment schedule that is tailored to your unique circumstances.
Bad news for others…
With a clearer picture of your financial health, credit providers will be in a stronger position to see if they are willing to take you on as a credit customer. A poor credit history will be more obvious and will work against you when applying for credit.
Having said that, this can also work in your favour if you struggled in the past and experienced a credit default, which you later paid and also kept up with your repayment commitments. Lenders will be able to see this new information under the new CCR and may be willing to take you on as a credit customer, or extend your credit.
The best thing you can do is to make repayments on time…
The new CCR means it’s now more important than ever before to make your repayments on time, as late or missed payments will show up on your credit report. If your circumstances have changed and you are finding it hard to make repayments, or you have lost your source of income/s, contact your credit provider right away as they may be able to help you restructure your repayment obligations.
Disclaimer: This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and seek specialist advice from a suitably qualified and licensed advisor.
8 must do’s before applying for a home or investment loan in 2019
Family guarantee home loans could be the answer
Time to ditch the plastic… or reduce your credit limits
Is opportunity cost destroying your long term wealth?
Borrowing money is challenging, focus on what you can control to win