The new Comprehensive Credit Reporting (CCR) law which passed both houses of parliament expands the information banks must report to credit agencies about their customers’ credit history.
It means lenders will have access to far more information on you as a borrower through your credit file. Previously, a credit report only showed credit inquiries, defaults and serious credit impairments.
Going forward, your credit report will also show:
- account open and closed dates,
- types of credit,
- credit limits,
- financial hardship information, and
- up to 24 months of repayment history information.
Why has comprehensive credit reporting come about?
The government expects that the new credit reporting law will allow borrowers in good financial situations to get more competitive rates when getting a home loan.
Australia’s introduction of CCR will also help lenders assess risk more accurately.
What does it mean for borrowers?
Before the change, only negative consumer data such as missed payments, defaults and bankruptcies would show up in your credit file.
Australian Banking Association CEO, Anna Bligh says that having more information on the credit report allows customers to have greater choice and more opportunity.
On the flip side, some believe that this law could affect the ability of borrowers with a brief period of financial hardship to get credit in the future. For example, if CCR was mandatory in 2020, more than 900,000 Australians who took mortgage repayment holidays due to the COVID-19 crisis would have been affected.
In short, the CCR score can be favourable for some borrowers, while others may likely suffer.
- You will get a more complete picture of yourself as a borrower and an accurate depiction of your credit conduct.
- Applying for a home loan becomes easier and faster as lenders can speed up the process through digitally acquired CCR information.
- By maintaining a positive repayment history, you can quickly rebuild your credit score and redeem yourself of any defaults in the past.
- You will no longer have to worry about your credit file being thin to prove your credit-worthiness.
- Your financial hardship information will remain on your credit report for twelve months or more, even if you faced hardship for a brief period of time.
- Minor delays in repayments could also be perceived as negative information on your credit report.
The National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019 passed both houses of parliament and will be mandatory from 1 July 2021.
What does it mean for lenders?
The new mandatory credit reporting law is expected to drive competition in the lending market by benefiting both lenders and borrowers.
- The lender’s turnaround time will increase due to fewer enquiries from their credit team. In other words, credit assessment becomes faster.
- Servicing calculations using the information from your credit file becomes more accurate on the lender’s end.
- With credit information such as credit type, repayment type, and loan term, lenders will have more certainty about your current financial commitments.
- Lenders can view a full picture of your credit conduct, which allows them to offer more tailored products.
- By better identifying potential credit stress, lenders can reduce bankruptcies and bad debts on their book.
Does CCR credit reporting affect my Equifax score?
The new information will be reflected in your credit report, including your Equifax score.
BYour monthly repayment history on credit accounts such as mortgages will show up in your Equifax credit record.
This means that your Equifax Score will change from month to month.
As you can see, your repayment history of 24 months is shown in your Equifax credit report.
The CCR codes reflect whether you have made timely repayments on the minimum amount required for each month or not.
The amendments to the bill also allow you to access your credit reporting information held by a credit reporting body free of charge every three months. Previously, it was every 12 months.
Learn how to check your credit report for free.
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.
Here’s what the scores mean:
- 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.
Are you worried about your credit score?
The secret to getting your home loan approved is to apply with the right lender, especially if you have a low credit score.
Our experts can help you find the right home loan solution for your credit situation.
Speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our free assessment form.