Australia continues to use comprehensive credit reporting (CCR), which was made mandatory for the big four banks back in July 2018, and optional for other lenders. This was a significant change in how the big 4 banks and other lenders add and share information with regards to your credit report. Lenders can now see a more accurate picture of your ability to make repayments and manage your credit, while consumers’ behaviour around these aspects should enable a more active influence over whether their future credit enquiries are successful.
What is CCR?
CCR – also called ‘positive reporting’, is the process of Australian lenders reporting additional information to Australia’s credit reference bureaus. The credit reference bureaus then hold this additional information, so it is accessible when lenders need to access your credit report. CCR allows lenders to build a more comprehensive picture of your credit history, and thus help them to make better, more responsible lending decisions based on your actual behaviour rather than by simply using your credit score.
CCR has actually been in place since March 2014, but was only optional for lenders. With initial implementation by Australian lenders low, on 2 November 2017 the government announced CCR would become mandatory for the big four banks from 1 July 2018. CCR is also a mandatory requirement in most of the 34 Organisational for Economic Cooperation and Development (OECD) member countries, bringing Australia in line with these countries.
This mandatory change to CCR required the “Big Four” banks to fully participate in this reporting system.
What actually changed?
Historically, Australia always used what is known as a “negative reporting” system. This means that, along with your personal information and data that may be a matter of public record, such as your name, date of birth, and driving licence ID, your credit report would only contain information related to:
- Enquiries for finance
- Court judgments
- Any other serious credit infringements
Under this regime, it would be possible for you to have had a history of late payments and defaults from a few years ago preventing you from accessing credit in the present. While these may still have an impact on whether or not you can get credit, under CCR lenders will also be able to see whether you have been making consistent repayments since that time, and thus may take a different view of your application.
What additional data is on my credit file?
Under CCR, your credit file could now contain information on your repayment history and your personal credit liability.
Repayment History Information
Information that will be visible on your credit file relating to repayment history will include:
- Last two years of repayments for your credit accounts. This will include credit cards, personal loans, your mortgage, and any other type of borrowing.
- Whether or not you made a payment.
- Whether the payment was made on time or how late it was made.
The final point is significant for consumers. There are likely to be many who pay late in the knowledge that late payments won’t usually be visible on their credit report unless they escalate to a more serious matter. Under CCR, consumers who ensure they pay on time stand to benefit.
Personal Credit Liability
As well as being able to see your personal repayment history, lenders can also see:
- The types of credit account you have opened, the dates you have opened them and, if relevant, closed them.
- The name of the credit provider.
- The current credit limit on the account.
What does CCR mean for consumers?
As a consumer, you have more control
Under CCR you can directly influence how lenders view you by ensuring you make repayments on time. CCR also helps young people to build a credit profile quicker, while also making it easier for anyone to recover from adverse credit events.
You could get a better deal on your personal loan, mortgage, or credit card
Although some lenders, long ago moved away from a “one rate for all” model for lending, CCR has ensured that most lenders have moved towards this system to remain competitive in the consumer finance marketplace.
With positive aspects of your consumer credit behaviour being visible on your report, lenders can see that you represent a lower risk, and thus you could be able to access lower interest rates among some lenders.
Lenders make better decisions, which also protects you
As CCR makes more information available to lenders, this enables them to make more informed decisions around credit applications, for example checking the credit you applied for is right for you. Lenders may even offer a loan with an interest rate and repayment schedule that is tailored to your unique circumstances.
What are the Challenges of CCR?
From a consumer perspective, the only real challenge with CCR is ensuring that you’re making your credit repayments on time. If you’re something of a lazy payer then CCR forces you to be more organised if you want to access better credit deals in the future.
Lenders have found CCR a much less challenging way of looking at consumers credit scores and habits.
All in all, both lenders and consumers benefit massively from the correct and thorough implementation of CCR.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.