Credit is something people often use to help them fulfil their dreams: buying a home, upgrading to a new car, taking that holiday or helping pay for life’s essentials. Any time you apply for credit, you go through several stages before you’re approved, one of which is credit checking. Changes are coming to the way those credit checks are reported, which is very important for you to know and understand.
Change is coming to credit reporting
Comprehensive Credit Reporting (CCR) allows more information to be included on a credit report, providing a more complete picture of a customer’s credit situation and behaviour. This means that lenders are able better to match credit lending to a customer’s individual needs.
Under CCR, credit information will be made available to all lenders participating in CCR including:
- Credit accounts that have been opened and closed
- The credit limits on those accounts
- Details of monthly payments made on these credit accounts for the past 24 months
This means that information like whether you make repayments on time will be included in the credit report. This additional data provides a fairer and more accurate picture of your credit worthiness and supports responsible lending.
MyState Bank’s home loan, personal loan and overdraft products will be included in CCR progressively through to 2019, and this new information will be included on credit reports for our customers.
What is credit reporting?
Did you know that when you apply for credit, most credit providers will run a credit check on your history?
This check provides insights on how you have historically handled your credit arrangements. The credit check is put together by a reporting body who collect information from organisations such as MyState Bank. Until recently, your credit report only included limited information, such as your identity details and any relevant ‘negative’ information such as any loan defaults or bankruptcies.
Further information and definitions
A credit report contains your personal information and details of your credit history. Your report can only be obtained by a credit provider if you have applied for a loan with them and have provided your consent as part of the application.
Detailed information on your credit report can be found here: https://www.creditsmart.org.au/manage-your-credit-report/what-to-check-in-your-credit-report/. A sample credit report can be found here: Sample Credit Report
A credit reporting body is an organisation that provides reports to credit providers to help them decide whether to lend you money. Both credit providers and credit reporting bodies are bound by the Privacy Act and must protect the privacy and security of your personal information at all times.
A credit score summarises all the information held in your credit report in the form of a number. The credit score provides an indication on how likely you are to pay back the money you owe to a credit provider.
Your credit score is typically a number between 0 and 1200. The higher the number the better your credit score is. Your credit score will keep changing over time, as each credit provider and reporting body obtains more up-to-date information about you or changes their formula for calculating your score.
The introduction of CCR gives a clearer picture to credit providers of your ability to repay your debts by looking at the repayment history of your credit over the previous 24 months.
Your credit score will most likely differ under CCR from that previously assessed given the additional information available of how you have conducted your credit facilities. If you’re good with credit and pay your bills on time, CCR will benefit you. If you continue to meet your credit responsibilities, you will build up a strong credit record that should make it easier for you to get credit in the future. If you manage your credit effectively, this will be positively reflected in your credit report.
On the other hand, any repayments you miss may also be noted on your credit record. A missed payment here and there may not have an impact you; however a pattern of missed payments may create concern for you when applying for credit in the future. Poor financial decisions now, may impact your ability to obtain credit in the future.
If your financial problems are mounting and you can’t see a way out, it is essential that you contact us immediately before the situation gets out of hand. We can work with you to find an appropriate solution no matter how hard your situation seems. Visit our financial hardship page for more information.
If you have been paying off your credit card and loans on time you are demonstrating your ability to responsibly manage your debts. With a clearer picture of your financial situation, credit providers are in a better position to make an informed decision on your application for credit. If you have a very good credit record you may be able to negotiate a better interest rate on your credit account.
On the flip side, CCR allows credit providers to see a consumer’s poor credit history in a more obvious manner and you run the risk of not being approved for credit.
Your credit score can improve over time as your information is retained on your credit report for a defined period of time. You may be able to improve your credit report by:
- Making sure all payments for bills and credit accounts are made on time
- Accessing a copy of your credit report and correcting errors on your credit report with the relevant credit provider or credit reporting body
- If necessary, take steps to correct inaccuracies with the relevant lender
- Checking out the CreditSmart website, http://www.creditsmart.org.au/ for more great tips on managing your credit
You are entitled to a free copy of your credit report every 12 months from a credit reporting body, or within three months of a declined credit application. MyState Bank provide your credit data to Equifax. If you would like to access your credit reporting refer to https://www.equifax.com.au/personal/products/credit-reports-scores-alerts/plan_pricing/ to get started.
If you think something is wrong with your credit report, the first step is to contact the relevant lender or credit reporting body and ask them to explain why the information is on your report. If the information is incorrect, it will be taken off or changed (depending on the circumstances). If they don’t agree that the information is incorrect, they will need to provide you with reasons.
The credit provider or credit reporting body must respond to you within 30 days – unless you agree to extend that period. Once the matter has been investigated, you must be provided with a written response indicating whether or not a correction will be made (and if not, why not). This will all be done for free.
Refer to https://www.creditsmart.org.au/manage-your-credit-report/fixing-errors-in-your-credit-report/ for more information.