Comprehensive Credit Reporting (CCR)

Changes to Credit Reporting... What you need to know!

Does it seem like the finance world is dominating the news at the moment? Between the ongoing Royal Commission and the recent federal budget we wouldn't really blame you if you were starting to 'switch off' to finance news.

Is there a problem with 'switching off'? Well possibly - especially if changes in the finance world that could affect YOU end up slipping under the radar!

So what upcoming changes do you NEED to know about?

It's probably fair to say that EVERYBODY should know about changes to credit reporting. Why? Because credit reporting could affect EVERYBODY!

And yes, changes are coming...

From 1 July 2018 mandatory comprehensive credit reporting (CCR) comes into effect with the big 4 banks required to participate fully in the credit reporting system.

The mandatory credit reporting will give lenders access to a deeper, richer set of data enabling them to better assess a borrower's true credit position and their ability to repay a loan.

What is CCR?

CCR was introduced in 2014 - at that time Australia shifted from a negative reporting system to a positive reporting system. However, up until now it has not been mandatory for lenders to adhere to the CCR guidelines. That has NOW changed for the big 4 banks.

What is the difference between the two systems?

Negative reporting system - recorded negative events in your credit history such as overdue debts, defaults, bankruptcy etc. Lenders based their assessment of your borrowing potential solely on this information. They could also access information on credit applications you have made but were unable to see whether those were approved or not.

Positive reporting system - this regime makes it easier for lenders to conduct a comprehensive and balanced assessment of your credit history. It now contains information on your repayment history for credit cards, home loans and personal loans including:

  • whether you have made a payment or the minimum payment required

  • whether the payment was made on time

It also contains information on your consumer credit liability including:

  • type of credit account opened

  • when it was opened and closed

  • the name of the credit provider, and

  • the current limit on the credit account

Your repayment history is stored on your credit file for up to two years.

Why was CCR introduced? CCR has brought our reporting system in line with many other Organisation for Economic Co-operation and Development (OECD) countries. Under CCR it is now easier for lenders to conduct a comprehensive and balanced assessment of a borrower applicant's credit history.

The positive? If you have a good credit rating it could potentially allow you to negotiate a better deal on your mortgage, personal loan or business loan. As mortgage brokers we will be there with you on your journey. When you establish a relationship with your broker it will be the ONE constant throughout the life of your mortgage(s) - even if you change lenders along the way.

The negative? If you have a poor credit rating you could find that obtaining credit becomes more difficult and/or expensive. On the other hand, it may also be easier to show you have recovered and stabilised your financial situation after a negative event such as a default.

Not with the big 4 banks? It is expected most other lenders not currently adhering to CCR will follow suit - before they are required to do so! The government is also considering extending this mandatory reporting to gas, electricity and phone service providers.

In short, at some point in the future ALL of your financial habits - both good AND bad - will be an open book to potential providers of finance and financial services.

The bottom line? There has never been a more important reason to pay attention to:

  • your bill paying habits

  • your credit card usage, and

  • staying on top of debt...

It COULD make a world of difference to your future ability to be approved for finance.

Need some help to make sure your credit report is in tip top shape? Contact us for a chat about debt consolidation. It may not be suitable for your situation but could be worth exploring.

Disclaimer: 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. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply. © 2018

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