Will CCR stop you from getting a home loan?
Most major banks and lenders have signed up to the Comprehensive Credit Reporting (CCR) regime so having a bad repayment history can now spell the end of your application.
Discover how to stay in the good books when it comes to your credit file so you can qualify for a home loan.
What new information is recorded on my credit file?
CCR or positive credit reporting can be beneficial to some borrowers because it gives you the opportunity to bounce back from a previously negative credit file.
However, it also means that Australians who had previously fallen just outside of getting a poor credit score are now being flagged.
The reason is that under the regime first introduced in March 2014, banks, lenders and credit unions are sharing more customer account information with credit agencies like Equifax (formerly Veda).
Specifically, your credit history now includes:
- The date a credit account is opened and closed.
- The type of credit you applied for whether it’s a credit card, personal loan or a mortgage.
- Current limit on credit accounts including any recent increases you may have made to your limit.
- Your 24-month account repayment history showing whether you’ve made the minimum payment required or not.
- Payments that are more than 2 weeks overdue are now listed as late repayments and remain on your credit file for 2 years.
On top of this, Equifax still continues to collect the following information:
- Basic information such as your full name, date of birth, gender, address, previous address, drivers licence number, employer and previous employer.
- Loans that you have applied for in the last five years are listed as credit enquiries.
- Loans or accounts where you’re more than 60 days overdue are listed as defaults.
- Court judgments.
- Court writs.
- Bankruptcy history (including Part IX history).
Not all banks and lenders have opted into Comprehensive Credit Reporting!
If you’ve got a bad credit history, there are specialist lenders and major banks that can help.
That’s because not all of them have signed onto CCR.
Please call us on 1300 889 743 or complete our free assessment form to speak with one of our expert mortgage brokers.
What is considered to be a late repayment?
Under positive credit reporting, payments of any amount that are 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 payment recorded on your credit file.
Once the grace period ends and you have not made the payment, this information will remain on your credit file for 2 years.
If your bill or minimum repayment is more than $150 and is more than 60 days overdue, then this will be listed as a default and stay on your file for 5 years.
Previously the minimum amount was $100.
Aren’t defaults worse than late repayments?
Yes, getting a default is considerably worse than getting a late repayment recorded on your repayment history information.
However, people with no defaults listed are now likely to get declined for a home loan if their repayment history information shows a bad record.
In particular, if someone has missed payments in the last 6 months this may be a sign that someone is currently in financial distress.
It’s now easier for your credit score to get dragged down!
If, for example, you only have a small amount of debt but your payments are not being maintained, a greater consideration will be given to your Equifax Score when borrowing at a higher LVR (95% of the purchase price).
Under the new rules, you could be hit on two fronts by being flagged for multiple credit enquiries and an unreliable repayment history, dragging your Equifax Score even lower than it previously would have been.
With credit limits also included on your credit file under CCR, any credit limit increases you sign up for could be included on your credit history and suggest that you’re having trouble managing your finances.
Good news if you already have defaults!
People with defaults on their credit file are now more likely to be approved by a mainstream lender if their last 2 years repayment history information is perfect.
Read more about the benefits of this new regime on the positive credit reporting page.
Only credit providers are obligated to report RHI
Phone, gas, power, water and other utility providers are not required to report your repayment history information, nor do they have access to this information themselves.
This means that your credit file will not display whether you’ve been paying your utility bills on time on a monthly basis.
What can you do right now?
- Check what your credit score is: Use the credit score calculator and speak to your mortgage broker if it comes back with a low score. We can provide some guidance on how to on the right-track, albeit we can’t provide financial advice.
- 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.
- Don’t overdraw your credit card.
- Make all of your repayments on time: Set up direct debit, have loan repayments scheduled for your payday and maintain a savings account with a pool of money to ensure you don’t miss your payments.
- Pay any defaults listed on your credit file.
- Stay in your current job and living address until you apply for your loan: This basic information will still play an important part when banks generate their own credit score.
- Demonstrate that you’re good with your money by making regular deposits into 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.
- If necessary, consolidate debt: Debt consolidation can be a great way to stay on top of your repayments across multiple credit card and loan facilities. If you currently have a mortgage, it’s best you speak to your mortgage broker about the best approach for your situation.
- 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.
What lenders actually see when they make a RHI enquiry?
When lenders make a so-called CCR enquiry with Equifax, the report will show a month-by-month breakdown of your 2-year repayment history, with each month assigned a specific code or score.
So for 12 months, the RHI 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. They stand for the following:
- O: Account is paid on time or within the ‘grace period’.
- 1: 15-29 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.
Discover if you qualify for a home loan
Whether you’re looking to buy a home or refinance your current mortgage to consolidate some debt, we can help!
Please call us on 1300 889 743 or complete our online enquiry form so we can assess your situation and find you a home loan solution that’s right for you.