Last Updated: 31st October, 2019

The Way Your Credit Score Is Calculated Has Changed

Published by Otto Dargan on October 4, 2019

The Big Four banks of Australia have fully adopted the Comprehensive Credit Reporting (CCR).

The introduction of CCR changed the type of consumer credit information that can be collected and reported.

Previously, Australia only had a negative credit reporting system but now this includes positive information.

CCR or positive credit reporting system will take into consideration positive information like timely repayments on your credit file.

Now, with the implementation of the positive reporting system, lenders will have access to:

  • The names of your credit providers – CBA, St. George Bank, etc.
  • The types of accounts (personal loans, mortgages, overdraft or credit card).
  • 24 months repayment history of your personal loans, car loans, mortgages and credit cards.
  • The dates when the credit accounts were opened and closed.
  • The limit on your credit accounts.
  • How does this affect your credit score?

    With positive credit reporting, banks and lenders now have access to a more complete picture of a borrowers personal repayment history, which was a part which was ignored entirely in the negative credit reporting.

    Most importantly, the CCR will now highlight your 24 months repayment history.

    Furthermore, young first home buyers or foreigners looking for a mortgage in Australia can quickly build their credit report to reflect on-time payments.

    If you were refinancing your home loan and have an excellent credit score because of CCR, you could potentially decrease your monthly payments and qualify for a better interest rate.

    The pros of comprehensive credit reporting (CCR) when applying for a home loan are:

    • It provides a more accurate and updated data of your credit score.
    • The time and effort you took to make your repayments on time will be acknowledged by the lenders. Even making minimum repayments of your credit card or personal loans is considered favourably.
    • If you had a “thin” credit file, a lender will be privy to more information on your credit file which could reflect your creditworthiness. You can establish a credit report faster.
    • If you had one or two missed repayments, it should not affect your home loan application, as the lender will look into your 24 months repayment history. However, if you keep missing on repayments and default, it will affect your credit score.

    Tips to improve your credit score

    Since positive credit reporting is here to stay, there are many things you can do today to improve your credit score:

    • Regularly review your credit report.
    • Report any errors.
    • Pay bills and make loan repayments on time.
    • Pay your credit card off in full each month.
    • Lower your credit card limits and try not to borrow to the limit.
    • Do not overdraw on your existing credit cards.
    • Consider consolidating debt.
    • Limit credit enquiries, as frequent applications can look bad on your credit report.
    • Remove your name from utility bills if you move.
    • Be cautious about identity theft.
    • Make sure to label your transactions, so banks and lenders know where the money goes.
    • Only apply for a credit card or loan when you need it and can afford it.
    • Try to stay in your current job and living address before you apply for a loan.
    • Pay defaults that are listed on your credit file, if any.

    Get your free credit report today!

    You’re entitled to a free annual credit report from any one of the three credit rating bureaus:

    • Equifax: 138 332
    • Experian: 1300 783 684
    • Illion: 1300 734 806

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

    We can identify any potential red flags and help you improve your credit score.

    Call us on 1300 889 743 or fill in our free assessment form to discuss your home loan options.