From 1 July 2018, comprehensive credit reporting (CCR) became mandatory 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 positive credit reporting?

Prior to the introduction of CCR or positive credit reporting in March 2014, Australia effectively operated under a “negative” credit reporting environment.

What that means is that credit agencies such as Equifax, which acquired Australia’s largest credit reporting bureau Veda Advantage, now record:

  • The date a credit account is opened.
  • Current limit on credit accounts.
  • The nature of the credit account.
  • The date a credit account is closed.
  • 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”listing 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 utilities accounts.

Call us today on 1300 889 743 or fill in our free assessment form and we can you how positive credit reporting will affect you.

Can lenders see this new data on my credit file?

Lenders must opt in to CCR before they can view this positive data.

If they don’t opt in to CCR, they are unable to view any of the new data elements.

Despite this, the new information is reflected in your Equifax Score (previously VedaScore).

Depending on the lender and the weighting they give to the Equifax Score, the new credit reporting system is already having an influence on how banks are credit scoring.

Read our guide on credit scoring to discover how a credit score can make or break your application.

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 buyer or a new migrant 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 amount of paperwork applicants need 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.

How?

If, for example, 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, which is typically anything over 90% of the property value.

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 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:

  • TVance

    Can my telephone company check my credit / repayment history now?

  • Repayment history data can only be provided by and shared with licensed credit providers so telephone and utility companies won’t be able to see mortgage and credit card accounts but lenders will.

  • theresa

    Are all banks similar in their credit scoring or do they have their own individual systems?

  • Hi theresa,

    Not all banks give the same weighting to your VedaScore. Some can score you more favourably depending on the specifics of your situation and there are even some that don’t use credit scoring at all. This may be your only option when trying to get a bad credit home loan.

  • Peggy

    What about late payment? Will I still be able to get a home loan despite a few minor late payments?

  • You can borrow up to 80% with a major lender or 90% with a specialist lender if you have made minor late payments. However, if you’ve missed up to 2 payments then you will only be able to go up to 80% with a specialist lender.

  • MD Fred

    How do banks and lenders assess financial stress on a family? Are there some specific events or such that they look at?

  • Hi Fred,
    The most recent Household Expenditure Survey from the Australian Bureau of Statistics (ABS) found that the most common financial stress experiences included:
    – Being unable to raise $2000 in a week for something important
    – Spending more money than received
    – Being unable to pay utility bills like gas, electricity or telephone on time
    – Being unable to pay registration or insurance on time
    – Pawning or sold something to make ends meet
    – Going without meals
    – Seeking assistance from welfare/community organisations
    – Seeking financial help from friends or family

    So if you’ve experienced one or more of this in a 12-month period, lenders will be more conservative and consider you to be in financial stress. They also look at your income and recent repayment histories along with your credit file.

  • kenner

    My bank manager told me that I have a below-average Equifax score /rating so if I want to get a better offer, I will need to come up with a larger deposit or repair my credit and come back. I had faced a bit of financial adversity before and also gave a few lenders application for loans I didn’t really need. What do you actually mean by credit repair?

  • Hey kenner,
    Credit repair is the process of removing any unfair, disputable and contestable information your Equifax credit file to increase your chances of getting an approval for a loan. Information that can be removed from your credit report includes bad credit records such as clearouts and overdue accounts as well as crossed or linked files and other issues like multiple identities. Once you get these black marks removed from your credit file then your credit score will improve which would make it easier for you to apply for a home loan and to get it approved. Please check out this page to learn more on this:
    https://www.homeloanexperts.com.au/bad-credit-home-loans/credit-repair/