Comprehensive credit reporting (CCR) became fully mandatory in Australia from July 2018, which means lenders now use a larger magnifying glass to pry into your credit history.
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.
As a result, it provided 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 financial institution where the account is held – NAB, Westpac etc.
- The nature of the credit account – Personal loan, home loan, overdraft or credit card.
- The date a credit account is opened and closed.
- Current limit on credit accounts.
- 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.
- 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.
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?
The new information is reflected in 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.
To get a free copy of your credit report, contact one of the three credit reporting bureaus directly.
- Experian Australia Credit Services
- Equifax (Previously Veda Advantage)
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.
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.
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.
- 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.
- 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.
- Share 50% of all credit information by 1 July 2018, and
- Share all credit information by 1 July 2019.
How can you adapt to positive credit reporting?
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 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:
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
By December 2012, the Australian Privacy Commissioner requested that ARCA develop the new credit reporting privacy code.
Therefore, after consultation with the public and other relevant stakeholders throughout 2013, the new reporting regime came into effect in March 2014 on a voluntary basis.
Finally, in November 2017, the government made it mandatory for the big four banks to participate in CCR, which stipulated that they:
The banks were provided an additional 90 days from 1 July both in 2018 and 2019 to comply – which they have.
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.