Changes to credit reporting in Australia

Prior to the introduction of CCR:

• credit providers only reported information such as new credit enquiries (for example new loan applications) and payment defaults to credit reporting bodies, and;
• a person’s credit report only contained limited information about their credit history with a focus on negative incidents such as overdue debts, bankruptcy or court judgments.

Following the introduction of CCR:

• credit providers will report additional information to credit reporting bodies such as dates a customer opened and closed their personal credit account(s), account types, current credit limit on each customer account and repayment history information, and;
• a person’s credit report will contain a more comprehensive view of their financial situation because it will include positive as well as negative information about the person’s credit history.

Why is the CCR important?

Community First is a strong supporter of CCR as it is a key component of responsible lending by giving credit providers a clearer and more balanced view of a person’s credit history and their ability and willingness to repay their debts in a timely manner.

CCR encourages and, in some instances, rewards borrowers that consistently meet their payment obligations in a timely manner, by increasing a person’s credit score. It is therefore more important than ever to pay your bills on time so your repayment history information is shown favourably on your credit report.

What is a credit report?

A credit report shows a person’ financial behaviour. It includes things like a person’s credit history, the credit accounts they hold and their credit score.

Credit providers use this information to help them decide whether to give you credit. However, they are not the only ones who can benefit from your credit report – you can too. Understanding your report may help you improve your credit score, which could mean access to lower rates of interest or credit you need to achieve your goals.

The Australian privacy laws govern what information can be included in your credit report, who that information can be disclosed to, how you can access that information and how you can seek the correction of any errors. For more information on accessing, correcting or managing your credit report, click here.

What is my credit score?

A person’s credit score is a statistical representation of how likely an individual is to conduct their loans in a proper manner and is calculated based on the credit information in your credit report.

Your credit score is based on a significant number of factors, including (but not limited to) how you conduct your existing credit facilities, how often you apply for credit, the type of credit you apply for, how often you move and change employment and a number of other factors.

Depending on the credit reporting body, your score will be between zero and either 1,000 or 1,200.

The score relates to a five-point scale (excellent, very good, good, average and below average). This helps a credit provider work out how risky it is for them to lend to you.

A higher score means the credit provider will consider you less risky. This could mean getting a better deal and saving money. A lower score may affect your ability to get a loan or credit. Click here to see how to improve your credit score.

For more information on credit scores, click here to visit the Credit smart website.

How does Community First use my credit report?

When you apply for a credit facility with Community First, we will undertake what is known as a “credit check”, where we will review your credit report and your credit score to assist in determining your credit worthiness.

In part, your credit report may help Community First to assess whether you can afford the loan you are applying for and how likely you are to repay it. As such, it is important to remember that your financial decisions and conduct of existing loan facilities can impact your ability to obtain future credit.

For more information on your credit report, click here to visit the Government’s Money Smart website.

What is the benefit of a “clean” credit report?

Poor conduct of your financial affairs or poor financial decisions can adversely affect your ability to obtain future credit or reduce the willingness of certain credit providers to consider applications from you. Conversely, the reverse is true if you maintain a good credit history.

If you conduct your credit facilities prudently, this will be reflected in your credit report and credit score. Credit providers will use both your credit report and credit score as a component of their credit assessment processes. It is not the only input into their assessment processes, but it can be a key factor.

The introduction of CCR now provides credit providers with a clearer, more holistic view of your ability to maintain your existing lending facilities and provides an insight into your ability to repay your debts. This is because under CCR, credit providers will not only have access to your negative credit information (such as payment defaults), but will also have details of all your current loan facilities and your repayment history for the previous 24 months.

Further information and support

The Credit Smart website has further information on CCR and credit reporting in Australia or you can contact us.

You can also view the Comprehensive Credit Reporting FAQs here.