Comprehensive Credit Reporting: How Will it Affect You?
You may have heard in the media or from your financial institution about Comprehensive Credit Reporting coming into effect, and you may be wondering what exactly it is and how it will affect you. While it means a significant change in the way lenders conduct credit reporting, understanding what it is and how it affects you could potentially see it work in your favour.
What is Comprehensive Credit Reporting?
Previously credit reporting tended to be negative, i.e. only loan amounts applied for and serious credit issues such as defaults and bankruptcies were shown. Now there is a more detailed structure in place where lenders also report on your monthly repayment conduct as well as the information they have been reporting on in the past. Most other developed countries are already operating with comprehensive credit reporting systems so it is in effect bringing us in line with them.
How Does it Work?
When you apply for finance, lenders will conduct a credit check as they have always done. However now when they do the credit check, they will now be able to see a more detailed history. The credit report will show your repayment history over the last 24 months, as well as dates that credit accounts were opened and / or closed, current credit limits, and the type of credit facility obtained. It will still show negative information such as defaults or bankruptcies. The repayment history can be discussed between licenced credit providers. Note: This does not include telcos and utility providers.
How Does it Affect Me?
Every time you make a repayment, are late with or miss a repayment, it will be shown in your credit history for up to 24 months. It will directly affect your ability to source loans and other credit facilities, and potentially the rate you will pay. Credit applications, defaults and bankruptcy history will still be shown as they have always been. It is even more important than ever to make your repayments on time. Bad repayment history will be more visible and have the ability to affect your borrowing capacity, whereas good repayment behaviour might actually mean you qualify for a more attractive interest rate.
What Can I Do About it?
Ensure you make your repayments on time. Set up direct debits and monitor your accounts. If you need to, schedule reminders to make sure you have sufficient funds in your account to cover the repayments. Lenders will now be able to see your detailed payment history, good or bad, so you want to make sure it is good. You have the opportunity to build your credit score by making sure your payments are made on time. If you have defaults and / or bankruptcy issues they will still appear on your report, but lenders will be able to see an accurate indication of your repayment history since those events. Making sure your keep your repayment history positive, regardless of what has happened historically, can help you down the road.
For more information on how Comprehensive Credit Reporting affects you contact us.