The credit reporting system in Australia used to be based solely on the negative credit rating system. However, a recent change called “Comprehensive Credit Reporting” or CCR, will be good news for many Australians who want to apply for credit cards and loans in the future. What exactly do these change bring us? This article will cover the importance, the benefits, and how CCR will affect us as borrowers.
The importance of Comprehensive Credit Reporting
When we apply for a credit card or for a loan, lenders need to assess our risk as a borrower by obtaining our credit score. Usually, this document is based on our performance with previous debts including our repayment history, late and missed repayments, amounts owed, bankruptcies, court orders and loan enquiries. All of this will have an effect on our interest rate when we borrow money for a loan, and it can effect whether or not we get a loan approval.
This year, change is coming to our credit report because of the introduction of Comprehensive Credit Reporting. Our credit score won’t just consist of the negative aspect of our previous debts, but this will also include a more positive, complete, and balanced representation of our credit history as a borrower. This can help financial institutions make better lending decisions where they can offer financial product suitable to our needs and profile when we apply for a loan or a credit card.
The new Comprehensive Credit Reporting will include additional information such as our active bank accounts, accounts that have been opened or closed, and our loan repayments behaviour like repaying debt on time over a two-year period. All of this information is shared by credit bureaus with financial institutions. This can improve the chance of getting an approval on our credit card or loan application.
What are the benefits of positive credit reporting?
Thanks to Comprehensive Credit Reporting there will be more information available to financial institutions regarding our credit history. CCR will benefit financial institutions because this will result in better lending assessment, fewer outstanding debts, less bankruptcies and more positive credit behaviour.
A single negative attribute won’t have a huge effect on our credit file, because more positive credit-related behaviour is included in the credit file which is why it’s called positive credit reporting. This means we don’t have to worry too much if we missed a single repayment. Instead, credit agencies will list a pattern of the negative incidents to establish our credit rating, like how many times we missed or made a late repayment.
People with less experience with credit can also benefit from CCR, since more information is added to the credit report. Overall, Comprehensive Credit Reporting will give a more complete and precise scoring.
Will positive credit reporting make it harder to get a home loan?
Expect that once Comprehensive Credit Reporting rolls out all of our credit scores will change. The change can help negate past bad credit experience because positive attributes can help balance it out.
CCR provides us with more complete credit information and monthly updates. So, if you belong to the category of low credit scorers in Australia, now is your chance to show good credit behaviours so you can secure a lower interest rate on your home loan.
If you’re a newbie in the credit world or if you’ve just migrated to Australia, it is now easier and quicker to establish a credit file. And if you already have a history with credit reporting, CCR has lessen the amount of paperwork since financial institutions will be able to verify your credit behaviour by obtaining information from the credit agencies rather than from the applicants.
These changes in our credit reporting are expected to commence in July 2018. If you’re considering getting a home loan or car loan once CCR takes into effect, you can start by getting a pre-approval here.