Comprehensive Credit Reporting

Comprehensive credit reporting (CCR) became fully mandatory in Australia for Big Four Banks from July 2018, which means they would use a larger magnifying glass to pry into your credit history.

This mandatory credit reporting regime has been passed by both houses of parliament on February 2021 with a few amendments and is expected to come into effect from July 2021.

There are both winners and losers when it comes to home loan approval – which side are you on?

What is comprehensive credit reporting?

Prior to the introduction of comprehensive credit reporting (CCR), Australia effectively operated under a “negative” credit reporting environment.

Which essentially meant only adverse credit events such as defaults and judgements showed up on your credit file.

However, with the implementation of CCR, banks are now required to share more information about the type of credit products you hold and your repayment history to credit reporting bureaus.

As a result, it provides a more complete and holistic picture of your credit history.

What new information is shared under the CCR?

New information that is shared with the credit reporting bureaus under positive credit reporting are:

• The credit type and loan amount you applied for, previously it only showed up as a credit enquiry.
• The nature of the credit account – Personal loan, home loan, overdraft or credit card.
• The financial institution where the account is held – NAB, Westpac etc.
• Maximum credit amount available for each account.
• The date a credit account is opened and closed.
• New and previous credit amounts.
• 24 months account payment history: Monthly repayment history will reflect whether you paid the minimum amount required on your financial commitments each month or not.
• Conditions related to your repayment.
• Default agreement details.

A “default” is listed, if your payment is late by 60 days or more and for amounts you owe that are over $150 (previously the amount was $100). It will still remain on your file for 5 years.

In addition, repayment history data can only be provided by and shared with licensed credit providers, so your information does not include telephone and utility accounts.

Call us today on 1300 889 743 or fill in our free assessment form, to find out how to use positive credit reporting to benefit you.

Can lenders see this new data on my credit file?

Yes!

The new information is reflected in your credit report including your Equifax Score (previously VedaScore).

Depending on the lender and the weighting they give to the Equifax Score, it also influences the way banks credit score.

Read our guide on credit scoring to discover how a credit score can make or break your application.

How is CCR reflected in my credit file?

You will find a lot of this new information, including your 24-month repayment history, under the heading ‘Consumer Credit Liability Information’.

If you have multiple accounts with the one lender, a separate table will appear for each account.

How much has comprehensive credit reporting impacted my credit score?

Everyone’s credit file is different, and its impact will be different for everyone.

According to an analysis by Credit Simple (Illion) of Australians with positive NAB data on their file – 52% saw their credit score increase. Meanwhile, 45% of credit scores fell, and 3% remained unchanged.

The median increase was of 35 points in their credit scores, while the typical decrease was 72 points.

This is consistent with other countries who’ve had this system for a while now. For example, in New Zealand where CCR was formally introduced in 2012, Kiwis saw that their credit scores were on average 100 points higher than before.

In another 2019 study by Experian, there has been a consistent increase in credit scores of Australians aged 25-34 years old since CCR was rolled out. However, despite being the most impacted age group, they are also the least aware.

The study also found that close to half (48%) of Australians surveyed were still unaware that credit providers in Australia were sharing more personal financial data than ever before.

Importance of prompt repayments

Did you know following the introduction of comprehensive credit reporting, your credit score can drop by 22% following just one missed credit card repayment? – even if you’ve never missed any credit card repayments before this, according to a report by Experian.

This drop increases to 26% with two missed credit card repayments, and a staggering 42% for those with three or more missed credit card repayments within three months.

Under positive credit reporting, payments of any amount that is more than 2 weeks overdue are listed as late on your repayment history information.

This is known as the 14-day ‘grace period’.

Tip: If you’re able to pay the late payment within the grace period, there will be no late payments recorded on your credit file.

How to get a free copy of your credit report?

To get a free copy of your credit report, contact one of the three credit reporting bureaus directly.

They are:

• Equifax (previously Veda Advantage): 138 332
• Illion (formerly Dun & Bradstreet): 1300 783 684
• Experian Australia Credit Services: 1300 734 806

You’re entitled to a free credit report within ten days of the request:

• Once every 12 months;
• If your credit application was declined. You must request a copy within 90 days from the date your application was declined; or
• If you’ve lodged a correction request and has been advised that your credit report has been fixed.

As mortgage brokers, we can access your credit file without leaving a credit enquiry on your file.

Comprehensive credit reporting – Undisclosed debts

The major banks have started using the comprehensive credit reporting information provided on a borrower’s credit report to assist with the home loan application process, specifically in relation to undisclosed debts.

Basically, the banks are cross-checking this new information against loan applications to see if there are other financial institutions where credit card, overdraft, personal and home loan accounts:

• have not been listed on the statement of position for a loan application; or
• have limits or amounts owing that are misrepresented on the statement of position.

When applying for a home loan:

• If there’s an undisclosed account that will be paid out with the proceeds of the loan being applied for – provide the necessary documentation and note it accordingly in your application.
• If an incorrect credit limit is present on your credit report – obtain evidence of the correct amount such as your current account statement.
• If an incorrect loan (personal loan/ home loan) amount is present – obtain evidence of the correct amount such as your home loan or personal account statement.

How will positive reporting help me qualify for a home loan?

Positive credit behaviour can help negate bad behaviour because it highlights both good and bad credit behaviour:

• Quicker to establish a credit report: This is great for first home buyers or new migrants to Australia that needs to build their credit profile before applying for a home loan.
• More balanced system for everyone: It rewards the good and gives people who have had credit problems in the past a second chance.
• Access to better home loan deals: Australians who previously fell into the “bad credit” category now have the chance to get a better interest rate.
• Cut down on application time: Positive credit reporting reduces the number of paperwork applicants needs to provide because lenders can collect this information from the credit bureau.

CCR allows you to recover faster from financial adversity and rebuild your credit profile.

How can CCR work against you?

Depending on the lender you apply with and the amount that you borrow, your Equifax Score can be dragged down by positive credit reporting.

How?

For example, if you only have a small amount of debt but you’re not keeping up with your repayments, a greater consideration will be given to your Equifax Score when borrowing at a higher loan to value ratio (LVR), which is typically anything over 90% of the property value.

Under the new rules, you’re hit on two fronts by being flagged for multiple credit enquiries and an unreliable repayment history, dragging your Equifax Score down even lower.

Any credit limit increases you apply for are now also included in your credit history, suggesting that you are having trouble managing your finances.

What hasn’t changed?

The following information will still be recorded on your credit file and have an impact on your Equifax Score:

• Basic information such as your full name, date of birth, gender, address, previous address, drivers licence number, employer and former employer.
• Loans that you applied for in the last five years, listed as credit enquiries.
• Loans or accounts where you are more than 60 days overdue are listed as defaults.
• Court judgments.
• Court writs.
• Bankruptcy history, including any Part IX agreements.

How can you adapt to positive credit reporting?

• Make all of your repayments on time: Set up a direct debit and have loan repayments scheduled for your payday. You should also maintain a savings account with a pool of money to ensure you don’t miss your repayments.
• Close any unnecessary and unused credit facilities/accounts, and keep the necessary evidence such as outgoing financial institution closure letter.
• Only apply for credit or a loan if and when you need it. Do your research before applying for a home loan and go with a lender that will take a common-sense approach to your situation.
• Do not overdraw your credit card or your savings account.
• Pay any defaults listed on your credit file.
• Label all transactions, so you remember what they are, and the banks can also see what the payments are for.
• Stay in your current job and living address until you apply for your loan. This information will still play an important part when banks generate their own credit score.
• Show that you are good with your money by making regular deposits to a savings account.
• Talk to your credit provider if you’re in financial trouble. They may be able to help you by setting up a payment plan.
• Ensure your credit file has accurate and up-to-date information. If you’re a Home Loan Experts customer, we can apply to get you a free copy of your credit file and guide you through what it means for you and your ability to get finance.

How can we help?

Speak to us, and we can compare several different options from a range of lenders for you and do it without adding another unnecessary enquiry to your credit file.

Did you know that not all banks give the same weighting to your Equifax Score?

Some will score you more favourably depending on your situation. Some that do not use credit scoring at all!

This may be your only option when trying to get a bad credit home loan.

Call us today on 1300 889 743 or complete our free assessment form to find out how we can help.

What are the advantages of comprehensive credit reporting for consumers?

Advantages of Comprehensive Credit Reporting for consumers:

• Applying for credit becomes easier and faster. E.g. When applying for home loans, you’re expected to provide a series of documents to the lender. With CCR, lenders will receive the CCR information digitally and will likely be directly loaded into their system leading to a faster turnaround time and a more accurate credit assessment.
• Consumers with bad credit due to past events have a great opportunity to quickly rebuild their credit score by maintaining a positive repayment history. E.g. a default stays on your file for 5 years, however, if you haven’t missed any repayments since then this is reflected on your credit file and the lender can see that as well.
• Consumers with a short credit history or a thin credit file will have more information on their file that the lender can use to ascertain their credit-worthiness. E.g. CCR has had the most significant impact on people aged 25-34 years old.
• A single adverse credit listing won’t significantly affect your credit score.
• Positive credit reporting provides a more complete picture of you as a borrower and is an accurate depiction of your credit conduct.

What are the advantages of comprehensive credit reporting for lenders?

Advantages of comprehensive credit reporting for lenders:

• Credit assessment becomes faster. The lender’s turn around time (e.g. application to pre-approval) increases due to fewer enquiries from the lenders’ credit team. Some lenders such as Macquarie who have already started participating in CCR do not require statements for loans a client is refinancing as that information is readily available in their credit file.
• Lenders have more certainty about the current financial commitments of their prospective customers as they’ll have all the necessary credit info such as the credit type, limit, repayment type and the loan term information from the report.
• Lenders can more accurately do the servicing calculation (borrowing power) using the information from the credit file. Prior to this, often a home loan was knocked back or delayed due to a customer forgetting to disclose a debt.
• Lenders can offer more tailored products and differentiate their offering based on a fuller picture of consumers’ credit conduct and their credit-worthiness.
• Lenders can more effectively adhere to their responsible lending mandate. E.g. CCR allows lenders to identify credit stress or over-committed early on before extending further credit and possibly reduce the number of bankruptcies and bad debt.
• It helps lenders differentiate between borrowers who otherwise look identical in the previous regime of negative credit reporting. For example, say two potential borrowers have bankruptcy against their credit file. Now, one of them maintains a perfect repayment history whereas the other simply stops borrowing, it makes assessing the credit-worthiness of the latter much harder.

What is the Repayment History Information (RHI) reporting system?

Lenders and credit providers have been providing Equifax with repayment history information monthly since July 2018.

It shows whether you’ve been making your payments on time on your credit accounts over the past two years.

When lenders make a CCR enquiry with Equifax, the report is displayed in a table format with each month over the past two years assigned with a specific score.

So for 12 months, the repayment history report will look something like this:

What does each CCR code mean?

The codes are set out under the Australian Credit Reporting Standards (ARCA) and are a quick way for lenders to scan your repayment history.

The scores are explained below:

• O: Account paid on time
• 1: 0-29 days overdue
• 2: 30-50 days overdue
• 3: 60-89 days overdue
• 4: 90-119 days overdue
• 5: 120-149 days overdue
• 6: 150-179 days overdue
• X: 180+ days overdue
• C: ‘Account is closed’
• A: ‘Not associated’
• R: ‘Not reported’ – the bank or credit provider didn’t provide payment history for this period, which is a fault with the credit provider, not necessarily you as an account holder.
• P: ‘Pending’ – purchases made with a credit or debit card that are pending (for up to 5 days) but have been deducted from your available funds until the merchant finalises the payment.
• O: ‘Other’
• T: ‘Transferred’ – a balance transfer of your debt with one lender to another usually to save on interest repayments on a credit card or store card.

Why introduce positive credit reporting?

Believe it or not, comprehensive credit reporting isn’t a new thing.

There have been many studies undertaken to support the benefits of positive credit reporting since the introduction of the Commonwealth Privacy Act 1988.

Besides, most other developed nations, such as the United States, already employ CCR to better screen potential borrowers.

The Australian Retail Credit Association (ARCA) had long been demanding change to the previous “negative” credit reporting regime in Australia.

Comprehensive credit reporting – Timeline

Timeline of the implementation of comprehensive credit reporting in Australia:

• 1988: The Privacy Act was enacted to promote and protect the privacy of individuals. Among other things, the Act also regulates consumer credit reporting in Australia. It only allowed negative credit reporting in the country.
• 12 March 2014: The Privacy Act was amended to allow sharing of comprehensive (positive) information about Australians’ credit history. It was mostly optional and was not widely adopted by banks as they wanted to hold on to their data.
• 2 November 2017: Australian government mandated the implementation of comprehensive credit reporting (CCR) for the Big Four banks.
• 1 July 2018: Big Four banks mandated to share 50% of credit data within 90 days.
• 30 September 2018: 90 days from 1 July, Big Four banks required to provide 50% of credit data of their choosing.
• 1 July 2019: Big Four mandated to share the remaining 50% of their credit data within 90 days.
• 30 September 2019: 90 days from 1 July 2019, the deadline to share the remaining 50% of the remaining data ends.
• 1 April 2020: Large ADIs (Authorised Deposit-taking Institutions) mandated to share 50% of their data within 90 days.
• 30 June 2020: Deadline for sharing 50% of ADIs data ends.
• 1 April 2021: Large ADIs mandated to share the remaining 50% of their data within 90 days.
• 30 June 2021: The deadline to share all credit data ends. CCR is fully rolled out.

*The Big Four refers to ANZ, CBA, NAB and Westpac.

**Large ADIs refer to financial institutions with residential assets over $100 Billion average over 3 years. It includes banks (Macquarie), credit unions (CUA), and foreign subsidiary banks (HSBC, Citi etc.).

Apply for a home loan today

If you’ve been thinking about getting a home loan, call us today for a free, no-obligation assessment.

Most importantly, we can properly assess your situation and find lenders that will accept your case and offer you a competitive home loan package complete with a great interest rate.

Get in touch with us by filling in our free assessment form or by calling 1300 889 743 today.