Applying for credit cards, loans and mortgages just got a whole lot harder – or easier, depending on how good you are at making repayments. With amended privacy laws, new national credit reporting requirements have increased to allow lenders access to a much more information about a customer’s financial history. This information includes positive data such as repayment history that will be given to credit reporting bureaus and lenders.
Currently, bureaus and lenders only provide negative data meaning they have limited access and visibility to a borrower’s current financial situation; lenders can only see the number of applications for credit, amount and type of credits, defaults, court rulings and prior bankruptcies. Thus, the inclusion of positive data can have an enormous impact on getting credit cards, loans, and mortgages. However, Experian – leading credit rating bureau, said that 2 in 3 Australians were not aware of the new changes regarding national credit reporting requirements.
Positive data isn’t yet being shared directly with lenders but is rather being shared with main credit bureaus such as Experian, Veda and Dun & Bradstreet. Thus, Australian credit providers can now access up to 24 months of borrowers previous credit repayment history. This ultimately means that the new credit requirement will impact applications for credit cards, loans, and mortgages.
Experian managing director Suzanne Steele called these new requirements an “overwhelmingly positive change for Australian borrowers”. The main positives include:
- Positive data may aid potential first home buyers get loans and mortgages that previously had been declined as banks can now see their short credit history etc.
- Inclusion of positive data may increase competition among lenders and force them to drive down credit costs as it will reduce the number of people who default on a loan.
- Applicants that regularly pay their credit card and loan bills on time may find it easier to get more loans in the future.
- Positive data will allows credit lenders a 360-degree view of borrower’s financial situation – allowing them to make a better decision with regards to the right level of debt that each borrower can manage.
- Make Your Repayments On Time – It’s now more important than ever to make your credit card, loan, and mortgage repayments on time as credits bureaus can now see your repayment history. We suggest a 3%-4% repayment of total balance which is just above the average minimum repayment each statement period.
- Keep Your Credit Score Positive – According to Experian, 71% of Australians don’t know what a credit score is and had never checked it. As your credit score is an indication of your current and previous credit history – it can positively impact your ability to get a loan.
- Avoid Multiple Inquires – Avoid submitting multiple credit inquiries within a short period of time but rather wait for replies and space it out.
Conclusively, the inclusion of positive data in credit reporting requirements is a step in the right direction for the Australian public. It can lead to fairer and more balanced lending practices – possibly creating an environment of less debt and tricky financial situations.
Read more about this upcoming law reform on the ALRC webpage. If you have any questions surrounding this change, contact one of our specialists in Debt Fix for further details.