What is Comprehensive Credit Reporting?
Never heard of Comprehensive Credit Reporting, or CCR? Have you checked your credit score recently? If not, now is the time to do exactly that!
Why? Well, thanks to the recent rollout of Comprehensive Credit Reporting, your credit information will begin being shared with each of Australia’s credit bureaus.
What does this mean for you and how can it help?
Let’s dive deep into CCR, answer some questions you may have, and examine its possible benefits.
What is Comprehensive Credit Reporting?
Also known as ‘positive reporting’, Comprehensive Credit Reporting refers to the sharing of additional credit information by Australia’s Credit Reporting Bodies, or CRBs.
This recent change provides licensed credit providers with access to comprehensive credit history information, allowing them to make better-informed lending decisions.
The beginnings of Comprehensive Credit Reporting (CCR) began in March of 2014 when amendments to the Privacy Act 1988 (1) took effect to allow for the inclusion of added credit history information in the credit files of Australians.
Until recently, however, CCR was optional and was only adopted by a limited number of financial providers. This changed in late 2017 as the Australian government announced CCR would be mandated.
Now, Australia’s licensed credit providers are required to have at least half of all positive consumer credit data “ready for reporting,” and they must have all of it ready by July 1, 2019.
Under CCR, consumer credit liability and repayment history information are both new categories that will now be included in consumer credit files.
Consumer credit liability includes the following information:
- Name of credit provider
- Type of credit account
- Date a credit account was opened or closed
- Current credit account limit
Repayment history includes the following information:
- Repayment history of credit accounts
- Whether or not a payment has been made
- Whether or not the payment was made on time
Under CCR, repayment history is stored on a credit file for 48 months. However, only the repayment history from credit providers with an Australian Credit License can be recorded.
Utility and telecommunications providers are not licensed credit providers. Therefore, these types of companies cannot see repayment details, and an individual’s repayment history with these companies cannot be included in their credit file.
What do these changes mean?
- The inclusion of repayment history and consumer credit liability information provides creditors with a complete picture of someone’s credit history and profile.
- Individuals who repay their debt on time and display good credit behaviour will now see this reflected on their credit file and score.
- People will be able to assume greater control over how potential lenders perceive them as borrowers. People will also be able to establish their credit history and recover from adverse financial situations more quickly.
Positive feedback may mean better rates in the future
New Zealand, the UK, and the US already have similar comprehensive credit reporting measures and risk-based rate structures in place. As evidenced in these markets, these changes can potentially result in better rates and improved credit access for consumers.
For financial institutions and lenders, Comprehensive Credit Reporting should translate to more informed lending decisions and result in fewer defaults, charge-offs, and outstanding debts. It may also allow them to bring new products to market and develop new lending processes.
However, since CCR is currently voluntary, it may be some time before all lenders opt-in and make the switch. This means additional CCR-related information may not appear on an individual’s credit file until their credit providers choose to share this information with Australia’s credit bureaus.
If you are unsure of whether a credit provider has adopted CCR, you should contact them to find out and learn more about their specific credit reporting practices.
How do I know if my repayment history is being shared?
According to the OAIC Privacy Fact Sheet (2), credit providers must inform consumers about their intent to disclose information to a credit reporting bureau before collecting repayment history information.
Credit Providers cannot disclose repayment history information that took place before the notice.
Be on the lookout for this notice from your credit providers. It may come via email, regular mail, or any time you enter into a new credit contract.
How is my credit information protected?
In Australia, personal information is protected under the Privacy Act 1988, which is regulated by the OAIC.
This and other credit reporting legislation strictly limit how lenders and credit reporting agencies can handle your personal information. This includes how a lender can use and manage the personal information they collect.
The OAIC website can provide additional information and details regarding credit information sharing and protection.
How can Comprehensive Credit Reporting help me?
By now, you’re likely wondering how the sharing of added credit history information under the CCR can help you as a borrower.
While it may have an adverse effect if you have difficulty making payments on time and successfully managing your credit accounts, if you are a responsible borrower, it can help you in many ways.
Benefit from a well-balanced credit reporting system
With Comprehensive Credit Reporting, your creditworthiness will be assessed under a much more reliable credit reporting system.
By including both negative and positive information, lenders and creditors will have a more complete picture of your credit history and provide greater transparency regarding their lending decisions.
This may result in greater access to credit that may not have been previously available.
Rewarded for good credit behaviour
Before CCR, credit bureaus in Australia did not have detailed information about credit accounts and access to repayment histories. Therefore, they were unable to base their lending and rate decisions on complete credit information.
With CCR’s principles of recognising good credit behaviour, you can expect to be rewarded with a higher credit score and stronger credit file by continuing to make timely repayments in full each month.
Access better deals and rates
The inclusion of positive repayment history information can lead to a healthier credit score, which in turn can provide you with access to better deals and more competitive rates. Lenders and creditors will also be able to offer products better suited to your credit history and needs.
Faster recovery from adverse events
More data sharing details can help pinpoint credit stress in the early stages before it develops further and becomes unmanageable. With CCR, it’s also more difficult for a single event to impact your credit reputation negatively.
If you make your payments on time, a previous missed or late fee that was included in your file months ago can be balanced out by continuing to demonstrate good credit behaviour.
Quickly establish your credit report
If you’re building credit for the first time or have a thin credit file, the extra information registered in your file as a result of CCR may be able to help you establish credit more quickly.
CCR will provide you with a greater ability to demonstrate your creditworthiness and ability to manage your credit reputation positively.
Credit score will change
A credit score isn’t stagnant. It’s dynamic and continually evolving from month to month. This is especially true with CCR and the extra information it allows to be shared.
Not surprisingly, your credit score will likely change with CCR meaning monitoring your credit score is more important now than ever before.
What can I do to maximise CCR benefits?
Here are some tips to prepare for CCR and maximise your benefits:
- Set up direct debits to ensure your bills get paid on time.
- Avoid continually opening and closing credit card accounts.
- Update your address with credit providers when you move.
- Take proactive steps to avoid being a victim of identity theft and fraud.
- Only apply for credit when you need it.
- Pay more than the monthly minimum payment when you can.
- Regularly check your credit score.
Can I opt out of CCR?
No, while the Privacy Act 1988 gives you clear rights to view your credit report and have incorrect information fixed or removed, you cannot opt out of CCR.