Also known as ‘positive credit reporting’, the ‘comprehensive credit reporting’ is Australia’s new system which now includes information about current accounts you hold, what accounts have been opened and closed, the date that you paid any default notices and how well you meet your repayments.
Banks traditionally only provide negative information for Australian’s credit reports, specifically detailing rejections and defaults. However, under the new ‘comprehensive credit reporting’, banks will also have to provide positive credit information on borrowers.
What are the benefits for the borrower?
– CCR could allow customers with good credit histories to obtain a lower interest rate on loan products;
– Recent positive behavior is registered, for example: if you have made all required payments in the past year, this can balance out any previous negative slip-ups, such as a missed payment a couple of years ago;
– If you have a very short history of credit which is positive, this will be more evident as currently most credit files will only show bad credit history;
– Your credit score will not be significantly impacted by just one single default/missed payment. Instead, it would take the credit report listing repeated missed payments or a general pattern of credit stress to impact your score;
What are the benefits for the lenders?
– It will give the lenders a more holistic picture of a customer’s credit situation which will support responsible lending;
– Lenders can tailor and differentiate their products and offers based on a more comprehensive picture of a consumer credit-worthiness and behavior in general;
What is the worry?
– If lenders see this as an opportunity to maintain the current interest rate margins for customers with a better credit file and increase the rates for those who have clearly been through difficulties in managing debt.
What does Peasy think?
– Essentially this is great because it supports customers that overall know how to manage debt but may have missed a credit card repayment some time ago because they were on holidays. Or customers who have defaulted on their loan because the direct debit was not set up properly. This holistic view can certainly support a client’s home loan application.
If you have any questions around any of the terms within this post, please get in touch.