BY MARIA PAPA – Lenders now have access to more information about your credit history than ever before. Eighty percent of all mortgages in Australia are now recorded as repayment history information (RHI) on your credit reports. Learn what the new Comprehensive Credit Reporting is and how it impacts you.
What is Comprehensive Credit Reporting (CCR)?
Credit bureaus compile credit reports based on feedback about credit behaviour from banks and other credit providers. Credit reports contain a credit rating between zero and 1200 as a measure of creditworthiness.
CCR is the information that lenders can access via credit rating agencies about your credit history. The introduction of CCR changed the type of consumer credit information that can be collected and reported. Previously, Australia only had a negative credit reporting system but now this includes positive information.
This includes whether you have a mortgage, your mortgage repayment history going back two years, credit card limits and repayment history, and repayment history on car or personal loans.
It is now mandatory for the big four banks to use CCR more fully and apply it when making credit assessments. It is still optional for smaller banks and other lenders.
Who does this impact?
In short, this impacts all eligible consumer credit accounts. These are accounts which provide or can provide consumer credit such as home loans, personal loans, car loans, credit cards and overdrafts.
In the past month around four million mortgage accounts were fed in, that’s about 80 per cent of all mortgages in Australia. 15 million credit cards, or 60 per cent of all cards, have been reported.
Following the initial bulk supply of information, the big four banks must continue to keep the information up to date.
How does it impact you?
- Those with good overall credit histories could eventually get a lower interest rate and those without may be charged a premium rate or find it more difficult to obtain credit.
- It should increase competition leading to better deals on mortgages, personal and business loans in the long run.
- The inclusion of ‘positive’ information can balance the ‘negative’ information previously reported.
- It will provide greater transparency on a borrower’s credit history and their ability to pay a loan.
Therefore, if you have a good credit history – you’re paying down their mortgage, you haven’t missed a payment on your car loan and credit cards are under control – you might be able to demand a better deal on interest rates.
What can you do to ensure a strong credit report?
- Regularly review your credit report
- Report any errors
- Pay bills and make loan repayments on time
- Pay your credit card off in full each month
- Lower credit card limits
- Consider consolidating debt
- Limit credit enquiries, as frequent applications can look bad on your credit report
- Remove your name from utility bills if you move
- Be cautious about identity theft.
How to download a credit report?
Request a copy from a credit reporting body like Equifax, illion or Experian.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
MBM Mortgage Pty Ltd trading as Maverick Finance | ABN 28 149 301 084 | Credit Representative Number 403019 is authorised under Credit License Number 389328
Maria Papa is a senior finance expert specialising in home loans, investment loans, self-employed loans, Alt Doc loans, car loans, personal loans and loan protection. She has offices in Sydney and Melbourne. If you have questions, you can call Maria at 0430 144 008 or email her at mpapa@maverickfinance.com.au.