Why all your bills and debts matter more than ever

The past few months have marked a big shift in credit reporting. After several years of gradual build-up, a policy known as ‘comprehensive credit reporting’ became mainstream in the Australian banking system.

This change means more ‘positive’ credit data will be included on your credit report so lenders can get a clearer picture of your finances. It could also impact your credit score.

What is comprehensive credit reporting?

First, a bit of background. Banks and other institutions that provide credit (or loans) share information with credit reporting bureaus about how their customers manage their credit products. This includes:

  • Home loans
  • Car loans
  • Personal loans
  • Credit cards
  • Power bills
  • Phone bills
  • Internet bills
  • Other bills and loans

In the past, institutions shared only ‘negative’ data with credit reporting bureaus, such as missing payments or defaulting on loans. They also shared only some data on some customers.

This meant lenders saw only negative information on an applicant’s credit report. Hopeful borrowers may also have been declined by lenders who couldn’t verify their creditworthiness due to a lack of available data.

Comprehensive credit reporting (CCR) means that institutions must share ‘positive’ data as well as negative data. This includes information about making payments on time and paying off loans.

Although CCR was introduced in March 2014, it wasn’t mandatory. In other words, many credit providers weren’t supplying credit bureaus with positive information.

As of 29 September 2019, the big four banks have been required to share positive and negative data on all eligible accounts to credit reporting bureaus. In time, other banks and credit providers will be required to follow suit.

What do the changes mean?

Comprehensive credit reporting paints a more complete picture of borrowers’ credit histories. This means banks and other credit providers can more accurately assess how good borrowers are at managing loans, and whether they should be given credit.

With access to more customer data across the board, lenders will also be able to offer more personalised loans to borrowers. This could improve market competition and make it easier for smaller lenders to compete more effectively with the big banks.

Additionally, CCR will give people the chance to balance out a negative event, like forgetting to pay a bill, with positive actions, such as paying other bills on time or paying off a loan.

Will my credit score change?

The short answer is ‘maybe’. Because the big four banks (and, later, other credit providers) are supplying more data to credit bureaus, you could see your credit score change for better or worse.

Theoretically, if you’ve been very diligent about paying bills on time, your credit score could increase.

If you have a solid track record and your credit score goes up, you could be offered loans with lower rates, lower fees and more features.

On the other hand, if your credit score goes down, you could be offered loans with higher rates, higher fees and fewer features.

So while staying on top of bills and debt has always been a good idea, it’s now more important than ever for prospective borrowers.

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