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.
Australia is moving to a new system of Comprehensive Credit Reporting (CCR) which will give lenders a clearer picture of each applicant’s finances.
The new system has been put in place by the Federal Government so that lenders can make better decisions about who they give a loan to.
This means people who can afford a loan won’t miss out and those who can’t afford it won’t be burdened with too much debt.
The new CCR system is only compulsory for the big banks but, as a responsible lender, Firstmac has chosen to take part too because we think it is the right thing to do for our customers.
Our Code of Ethics states that:
"As a residential and vehicle lender, our most important responsibility is to ensure that our product helps our customers and does not harm them. For this reason, we have adopted stringent credit policies which prevent customers from borrowing too much. We do not use high-pressure sales tactics, we consider each individual’s unique financial position, and we often counsel applicants to borrow less."
Supporting and using Comprehensive Credit Reporting helps us to meet this responsibility.
To find out what CCR means for you, please see our overview below.
When you apply to a lender for a loan, they will look at a credit report to help decide out if you will be able to repay it.
In the past, the report was focused on a small number of negative aspects of your history, like whether you had ever fallen behind in your payments and been chased up by your lender, whether you had ever been declared bankrupt, and whether you had unpaid bills.
Now, it will give a much richer and more detailed picture of your credit history and ability to repay.
Lender will now report and be able to see not just whether you have had a default, but also any loans you have outstanding and your monthly repayment history.
This will show how much debt you have and how good you are at paying it back.
CCR gives lenders a better knowledge of your credit history, which means they can reward applicants with a history of paying on time.
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.
If you’ve done the hard work in the past to make your repayments on time, you should be able to borrow money more easily and maybe even get lower interest rates, than someone with a history of late repayments.
It also means that if you don’t have a long credit history – you might find it easier to get a loan because your lender can see that you were very regular in your repayments on a credit card from years ago. 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.
Another benefit is that if you have defaulted in the past, but have now returned to making your repayments regularly, a prospective lender can see that you now have your money situation under control and may be more likely to give you a 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.
You can obtain a free copy of your credit report once a year from one of the credit reporting bodies below.
Credit reporting agencies
13 83 32
1300 734 806
1300 783 684
03 6213 5555