More carrot, less stick: Comprehensive Credit Reporting
Many people only pay their bills on time to avoid being slugged with late fees and a bad credit rating. But a big change this month means that you can now be rewarded for timely repayments.
From mid-September, ANZ, NAB, Westpac and CBA all agreed to commence Comprehensive Credit Reporting (CCR).
It’s seen as a more “positive” reporting system than the “negative” credit reporting system that has previously been in place.
CCR was introduced back in July but it’s just taken a while for the big four banks to get onboard.
Hold up. What exactly is CCR?
CCR will see the banks provide additional data to credit reporting bodies such as Experian, Illion and Equifax.
The data that they’re now required to supply to these agencies include:
– The type of loan or credit account.
– When it was opened or closed.
– The credit limit.
– When payments were made on time.
– And when payments were made 15 days late (not to mention the ones that are made 45 days late!).
So how does this help my situation?
In years gone by, the credit reporting bodies only heard about you when you had messed up.
Basically, this meant that banks, credit unions and lenders could only really assess your borrowing capacity on the negative aspects of your credit history. This included late payments or defaults.
However, now that CCR has been adopted by the major banks, your positive credit history, such as timely repayments, will be reported too.
This now gives your credit score the chance to go up – not just down.
Here’s the real kicker though
Just by knowing the above information you’re already more informed than 60% of the population, according to research by credit reporting agency Experian.
But the best bit is: positive credit reporting can help you obtain a loan for a home or business.
“From our experience in the 19 other countries where we operate credit bureaus, positive data sharing is a much fairer system and provides consumers with better credit opportunities,” says Experian Australia’s Poli Konstantinidis.
“It doesn’t just help those with strong credit scores, it also means those without a long credit history, young first home buyers for example, can build one quicker than before.”
So what’s my next step?
Well, that’s simple. Make sure you’re paying all your bills on time!
“This isn’t about the value of the car you drive or how big your recent pay rise was,” says Konstantinidis.
“Pay credit cards and loans on time, as lenders may now consider this when deciding whether or not to approve your credit application.”
You’ll also want to check your current credit score.
You can get a free credit report once a year from one of three national credit reporting bodies (CRB’s). You can find out how on this government website.
If you need a hand doing so – or you discover that you have a poor rating and want help improving it – then get in touch.
We’d be more than happy to help out.
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