Comprehensive Credit Reporting in Australia: how will it affect you?
Comprehensive Credit Reporting (CCR) will be a positive for many borrowers, because for the first time Australians will be credit scored on what they do right, as well as what they've done wrong.
Last November, Treasurer Scott Morrison announced the roll out deadline of the Comprehensive Credit Reporting (CCR) mandate – 50 % implementation of this mandate by July 2018, and 100% by 1st July 2019. But what does Comprehensive Credit Reporting mean, and how will this change the way we apply for credit?
What is CCR?
Currently in Australia the majority of our lenders (including the big 4 banks) only share negative credit scoring information with credit reporting bureaus. This means that our credit scores are largely made up of the presence (or absence) of loan arrears, late payments and defaults.
Once the Comprehensive Credit Reporting mandate has been fully executed, all lenders will be obligated to provide positive and negative credit data relating to their customers, resulting in a more rounded snapshot of your personal credit history.
The table below shows which information will be included on your credit file once CCR comes into effect.
How will CCR affect my credit file?
It is likely that the full implementation of CCR will change your overall credit score. However, the CCR State of the Industry infographic released by Equifax in November 2017 shows that 1.1 million individuals in Australia have already benefited from the initial CCR roll out, as they now have positive credit history instead of no credit history.
You can view your credit score for free by clicking here (you can also receive an updated score every 6 months to track how your score is changing with the further roll out of CCR) or order a free copy of your credit file from Equifax.
What can I do to ensure I have the best possible credit score?
Pay on time: credit cards and loans have regular monthly repayments. When you make a habit of repaying on the due date, you build a positive credit history.
Available balance: if you maintain an available credit card balance that's always in excess of what you owe, you build a positive history.
Keep the credit card you have serviced for a long time: if you use a few cards to get you through a tough time, pay out the most recent cards. Keep the longest-term credit card and its "good" credit history – it accrues more positives.
Prioritise your mortgage: your mortgage is likely to be the largest and longest-term of your debts, so prioritise the repayments and build a long, positive record.
Consult a broker: you might not understand how good your credit score is, but a broker does and can probably use it to find you a better loan.
Use multiple interest-free cards: rolling-over credit card debt into a new card that's interest free might be a necessary one-off manoeuvre, but don't make it a habit – it scores as a negative.
Apply for too many loans and cards: be sparing in your applications – they can score negatively.
Make late payments: do what you can do to avoid missing payments.
Go over 60 days: if you do have to miss a repayment, don't let non-payment go more than two months. If it is because of a life event, such as serious illness, speak to your lender as soon as possible.
If you have any questions about this information at all and how this relates to your chances of securing finance to purchase a home, please contact us today or call Geoff on 0417 143 318.