Australia’s credit scoring system is changing from 1 July 2018. It will be known as the CCR (Comprehensive Credit Reporting), and you better pay all your loans and credit cards on time or your credit report is at risk.
The current credit reporting system is known as a negative credit reporting system – one that only gets notified when things get bad (eg. credit defaults) or when you apply for credit.
The implementation of Comprehensive Credit Reporting (a positive credit reporting system) is mooted as one that rewards those who pay all their loans, bills and credit facilities on time.
But there are concerns that it may penalise those with lower incomes, and perhaps even create a boom for loan sharks looking to make money from those with late payments on their credit cards.
What’s going to happen?
From changes to the Privacy Act, a lot more of your data is now available for lenders via your Credit Report.
This change enables two years of your credit history to be made available.
And credit providers will be able to see positive data on you for the last two years.
An example of positive data is up to date repayment history or closure of a credit card.
Lenders are required to provide at least 40% of your positive credit data by the years end.
Is this Good or Bad for me?
If you don’t pay your bills on time and are often forgetful with credit cards or loan repayments – it’s BAD.
If you miss once or twice, that’s fine. But if your repayments are continually late – it might cause you problems.
Therefore, you should set up direct debits for everything you can. Automate your forgetfulness!
Will it affect my Home Loan Application?
Potentially, yes. After 1 July 2018, your lender may access up to 2 years history and use that during their assessment.
When you apply for a loan, your lender will access your credit file from one of the credit reporting agencies.
Your lender may also process their own computer-generated credit score, which can stop your home loan application in its tracks.
What do lenders actually look for?
There’s a few important factors here.
- Stable employment history
- Stable address history (too many multiple addresses are bad)
- Few credit applications (multiple credit applications are often an auto-decline for a home loan)
- Cash in the bank is a big plus
- And now… They can view your Comprehensive Credit Report!
You can find some more info over here at Credit Smart: