How can Comprehensive Credit Reporting impact me as a borrower?
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Comprehensive Credit Reporting (CCR) changed the financial services industry in a big way!
Below, we’ll take a closer look at the Australian CCR regulations, and what how it impacts you as a consumer.
What is Comprehensive Credit Reporting, and how did it change?
CCR is a system where lenders share your financial data with credit bureaus like Equifax and Experian. This information is then listed on your credit report and in turn impacts your credit score. Lenders use this information to assess your financial position when you apply for a loan or credit card.
Back when CCR first became mandatory in November 2017, it only applied to the Big Four banks. By July 2018, these institutions were required to provide 50% of their customer’s credit data with reporting bureaus; however, this jumped to 100% in 2019.
But as of 30 June 2021, all financial institutions (including banks, credit unions and foreign subsidiary banks) are required to provide comprehensive credit data to credit bureaus, and not just the Big Four.
How might these changes affect me?
Once these regulations were implemented, you may have noticed a change to your credit score, for better or for worse. This is because of the new information which may be added to your credit report.
Prior to CCR, banks were only required to provide details around a handful of factors like the credit enquiries you’ve lodged or any defaults in your name.
Under the new changes, financial institutions now need to provide additional information like the type of credit products you’ve applied for, account opening and closing dates, credit limits for each account and your monthly repayment amounts for the past two years.
This may sound intimidating. But if you’ve been financially responsible over the past few years, there’s a good chance that your credit score will increase to reflect this.
What are the benefits of choosing a lender with CCR?
Below are some of the key benefits of choosing a lender who uses CCR.
Be rewarded for good credit behaviour
Previously, only negative financial behaviour was recorded on your credit report. But now, positive financial behaviour will be recorded as well. This may enable you to take out loans with a better interest rates or boost your chances of approval.
Quicker to build your credit profile
This is a bonus for people who haven’t applied for a credit card or home loan before but need to build their credit profile before taking out a loan.
Fair system for everyone
If you’re sensible with your money, you’ll be rewarded with a higher credit score and favourable credit report. On the other hand, if you’ve experienced financial difficulty in the past, you should be able to get your credit score back on track faster if you make their repayments on time.
Cut down your application time
Because so much of your information will now be included in your credit report, applying for a loan should be quicker and easier.
How can I prepare myself for the upcoming changes to CCR?
If you’re planning on applying for credit this year, it’s important that you’re in the strongest financial position possible. Below are four tips to keeping your credit score in good shape.
Pay your bills and repayments on time. Set up a direct debit in advance if you’re prone to forgetting, or schedule your loan repayments to come out on the day you get paid.
Check your credit report to make sure it’s correct. An incorrect listing can drag your score down unnecessarily. It’s a quick process to obtain your current credit report and you can also set up credit alerts to make you aware of any fraudulent listings.
Only apply for credit if you need it. Don’t take out that extra credit card or loan if you don’t need it for something worthwhile.
Keep your lender in the loop. If you’re having trouble meeting your repayments, don’t put your head in the sand. Let your lender know as soon as possible so it can arrange for a temporary payment plan. This can prevent your credit score from being impacted further.
While the CCR laws may sound intimidating at first, they may actually work in your favour if you’ve been a responsible borrower.
Written by Ben King.
Ben King is a public affairs manager and personal finance expert at Finder.
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