To better understand what the new 'Comprehensive Credit Reporting' is and how it affects you, we firstly need to understand how the old credit reporting system worked.
By understanding what is was, we will better understand the new changes and there implications to your credit score.
Prior to the 12th of March 2014, Australia's credit reporting system was based on negative listings. What this means is that only a negative event would be listed on your credit file. For example, if you had a payment default or court judgement (black mark) against you, this would be displayed for creditors to view and make their loan decisions based on that. Whereas if you made regular, on time payments to your credit card, home/car loan etc. this information would not be recorded on your credit file. While this system worked, it fails to provide creditors with the full picture of an individual's credit behaviour.
Comprehensive Credit Reporting is designed to provide creditors with the full picture of your credit and payment behaviour, allowing creditors to make a more informed decision regard the credit position of their clients. Comprehensive Reporting requires credit providers with a credit licence, to submit both negative and positive credit information to credit reporting agencies such as Veda, Experian and Dun & Bradstreet. The type of positive information can include:
The opened and closed date of a credit account
The credit limit
Credit Limit changes
The type of credit account (credit card, car loan, phone plan etc.)
24 months of repayment history.
So are the changes good or bad from a consumer's point of view?
The answer is far too complicated to be expressed in this short article. However, the consensus from those in the industry is both Yes and No.
'Yes', Comprehensive Reporting will provide more information to creditors, who could use that information to make better informed decisionson an individual's credit value. It will also make building a credit history easier for individuals and for the first time in Australia, it will provide evidence of good credit behaviour.
On the 'No' side, the facts are more concerning:
· No, Comprehensive Reporting does not address the main issue of creditors submitting negative listings without proper due diligence and quality assurances in place, resulting in tens of thousands of Australians being incorrectly adversely affected.
· No, the new changes do not curtail the growing power of credit reporting agencies that have insufficient safe guards in place to prevent their clients submitting incorrect data that can seriously affect people lives.
· No, the new legislation does not go far enough enforcing creditors to work with credit repair organisations.
Next time you receive an overdue credit card statement or a phone call from your car loan provider, make sure that you consider the long term consequences of making a late payment. While one every few months won't ruin your credit score, consistent late payers may find it very difficult to secure credit.
If you do have a negative listing or 'black mark' on your credit file, contact Budget Credit Repair to see if they can be removed and become 'credit ready'. For further information, contact Budget Credit Repair on 1300 2 REPAIR (1300 27 37 24) or visit www.budgetcreditrepair.com.au.