What Comprehensive Credit Reporting Means For Australian Consumers

Have you ever felt like improving your credit history is impossible? No matter how hard you try, it seems your credit score remains in place, like a stubborn stain. Well, something happened in July 2018 that will forever change the relationship between Aussies and their credit profile: comprehensive credit reporting (CCR). Comprehensive credit reporting requires credit providers to change the way they record your credit history; both positive and negative listings. This shift will have a significant impact on consumers with bad credit history as well as lenders.

CCR in a nutshell

The main idea behind CCR is to allow lenders to make informed assessments of a consumer’s credit history better. In the past, lenders would base their assessments solely on the negative listings in your credit file. Negative listings include things like: 

• Missed repayments
• Defaults
• Court orders
• Bankruptcies.

Now, lenders will also include recent positive information, like:

• What kind of credit products you’ve held over the last 2 years
• What you usually repay
• How often you make your repayments and how frequently you pay them by the due date.

Countries like the UK and the USA have had comprehensive credit reporting implemented in some form for many years. Australia’s introduction of the system brings us up to speed with many similar nations. 

Benefits of CCR to your credit score

Obviously, the major benefit for consumers is having their positive credit history recorded. This, in turn, allows Aussies to improve their credit score with more agency. For example, making all required repayments over the last 12 months may go a long way to balance out negative credit listings from previous years.  This is a major change. In the past, consumers were at the mercy of their credit reports. Specifically, bad credit listings would remain on file for many years, without any tangible way of improving your score.  As a result, CCR may also soften the damage that one negative listing can have on your score. 

Benefits of CCR to credit providers

The ultimate objective for CCR is to allow lenders to make more informed decisions about an applicant.  For example, lenders may see your poor credit score from your past, but they will also see you have consistently shown responsible borrowing habits over the past year. Lenders can, as a result, get a much clearer picture of your financial situation. This may also help improve responsible lending.

What can I do to improve my credit score?

While improving your bad credit history is by no means an overnight fix, CCR goes a long way to helping bad credit consumers access other parts of the market.  Here are two ways of staying on top of your credit score:

1. Always pay your bills and make repayments on time. 
2. Regularly check your credit report. Remember, there are three credit bureaus (Experian, Equifax, and Illion). These bureaus may vary slightly in the information they contain, so it may be worth comparing the information from different bureaus. 

Who is implementing CCR?

Initially, the big four banks were required to provide 50% of their data by July 2018 and 100% by July 2019. Since then, more and more credit providers are sharing their credit information - and it’s not just banks. More and more non-traditional lending institutions are sharing positive data.  Remember, however, CCR is voluntary at this stage. Furthermore, only providers who hold an Australian Credit Licence can record your repayment history. Telecommunications and other utility providers are not licensed providers, so your history will not be recorded.

Open banking in 2020

Another major change is coming to the Australian finance industry. From February 2020, all of the big four banks will need to provide your individual data. Moreover, consumers will be able to request their financial data or ask for it to be sent to another accredited institution.  Put simply, open banking puts you in control of your financial data. This will allow consumers to find the best service, as well as make it easier to select new products and services that are better suited to your individual situation.