Do you know there have been important changes to credit reporting in Australia? Find out how these changes could impact your ability to take out a home loan.
As Strategic Partner, Craig Forman - Director and Mortgage Broker of Cane Financial - explains, Comprehensive Credit Reporting (CCR) - the name given to Australia's new credit reporting system - allows positive credit data to be included in your credit report. Craig shares the lowdown on what a credit report is, what's new with CCR and what it means for you.
What Is A Credit Report?
Credit providers like banks, utility companies and telecommunications carriers provide details about your credit habits to credit reporting bodies. These agencies use this information to compile your credit report.
Among other details, your credit report contains your credit rating. This is a numerical value that represents your creditworthiness and how reliable you are as a borrower. The higher the score, the better.
What Is Your Credit Report Used For?
When you apply for a home or investment loan, or any type of loan like a car loan, the lender will use your credit report to help them decide whether to approve your application. Your credit score isn’t the only thing a lender will look at – they will also take into account your assets and liabilities and overall living expenses – but it is a consideration.
In the past, banks may have only shared negative financial information about you with other lenders. However, the mandatory CCR system requires the big four banks to pass on positive information about you as well. The measure is designed to give lenders greater insight into a potential borrower’s true credit position and their ability to repay a loan.
What this means is that the big four banks are now sharing more credit data about you with credit reporting bodies. So, instead of only being able to access negative information like payment defaults and bankruptcies from credit reporting agencies, lenders can now find out positive details like your repayment history. You cannot stop this information from being shared – by law the big four banks have to do so.
What Does CCR Mean For You?
Your credit rating may change. If you routinely pay your credit card off in time, for example, your credit score may go up, as your positive track record will now be factored in. However, if you have several credit cards and are late in paying them off, your credit score could go down.
As a result, the changes could affect your ability to take out a home loan.
Tips To Keep Your Credit Report Healthy
1. Pay your bills and make loan repayments on time
2. Pay your credit card off in full each month
3. Lower your credit card limits and get rid of credit cards you don’t need.
4. Consider consolidating debt (speak to us about this)
5. Limit your credit enquiries, as frequent applications can look bad on your credit report
6. Remove your name from utility bills if you move
7. Be cautious about identity theft
How To Access Your Credit Report
You can access a copy of your credit report for free once a year from credit reporting bodies. The main ones are Equifax, Dun and Bradstreet, Experian and Tasmanian Collection Service. For more information, visit ASIC MoneySmart or contact Cane Financial.
Like To Learn More?
The changes to credit reporting may be a good thing – they could improve your chances of being approved for a loan. If you’re concerned about how they affect you as a borrower, contact Craig Forman on 0467 606 400