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Comprehensive Credit Reporting – a big change to Australia’s credit industry

Posted in 'Credit Reports' by Ben Ryland

15 April 2016

It’s been nearly two years since a ground breaking change was introduced to Australia’s credit reporting system – the introduction of payment history on consumer credit files.

In truth, Australia’s credit reporting system has been lagging behind other major economies by decades in terms of the amount of information which is present on a credit file. Credit providers throughout Australia have only been able to view relatively negative information when performing a credit check, with good payment behaviour rarely taken into account. This shift in approach is aimed at providing lenders with more information allowing them to make better and well informed lending decisions when it comes to judging an individual’s credit worthiness.

This new and improved ‘Comprehensive Credit Reporting’ (CCR) process couldn’t just come into effect overnight – there needed to be some important changes made to the regulations governing the industry - the Privacy Act 1988. The Privacy Act 1988 stipulates the conditions and rules regarding what consumer credit information can be provided to a credit bureau. The new Comprehensive Credit Reporting system is a big change for Australia’s old and tired credit check process – it’s a vital change that was needed to promote responsible lending amongst credit providers, and to give consumers a clearer picture as to their own credit report position.

A traditional credit file would report any credit enquiries (applications made with a lender), payment defaults, and court information. This gave an air of negativity to many credit reports, with positive information in short supply.

Comprehensive Credit Reporting was introduced in March 2014 across the country and the detail on credit reports has been extended to include:

  • 24 months of repayment history which has been made on a credit account
  • Credit limit of the account (routinely seen on credit card accounts as the total amount available to borrow)
  • The type of credit account which has been taken out e.g. mortgage, credit card, auto loan
  • The date the credit account was opened and/or closed
  • This extra information will allow lenders to make better lending decisions when consulting a consumer’s credit report – which is the purpose of this report.

    The biggest addition to credit files is the introduction of 2 years’ worth of repayment history. This history will show if payments have been made as scheduled or if payments are being missed.

    Importantly lenders need to obtain licences in order to share this history with the credit bureaus in Australia, and this along with the bureaus needing to adjust their own reporting systems has led to a delay in payment history appearing on many consumer credit reports. As it is now approaching two years since Comprehensive Credit Reporting was introduced, these additions are gradually beginning to appear on more and more reports.

    Interestingly, utility and telco companies will not be providing credit history to the credit bureaus, with only licenced credit providers able to do so. Furthermore this is an opt-in scheme for lenders and they won’t be forced to provide this history.

    Of course, the biggest benefit to Australian consumers performing a credit check of their own report and making credit enquiries is that the new system will indicate good payment behaviour. Moving away from negative reporting; those who pay back credit on time will have their efforts rewarded through better credit scores as a result of positive repayment history.

    This repayment history will also benefit those who have suffered with low credit scores, as any positive repayment history can help to counteract the impact of negative default information, enabling those to build up their credit history again in a timelier manner.

    Anyone from overseas who settles in Australia and seeks to do a credit check will also benefit from Comprehensive Credit Reporting. With payment history being reported, newcomers will be able to build up their credit profile quickly, and it will even help the young who may be beginning their credit journey.

    While it is taking time for payment history to appear on a credit check, the benefits of moving towards this expanded reporting system will help those with low credit scores, high credit scores and the credit providers lending the money.

    All in all, everyone will benefit from a much stronger and more informative credit report.

    Ben Ryland

    Ben has a degree in International Business and Management. Prior to working for us, Ben spent a year working for an IT firm in France. He writes on a wide range of issues across all areas of credit and personal finance.

    Ben is a Senior Credit Analyst at checkmyfile.

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