Credit report changes

One of the biggest changes in credit reporting regime has hit Australia. What does it mean for you as an investor and why should you care?
If you haven’t paid much attention to your credit history, you may want to now, as Australia embarks on a massive overhaul of its credit reporting system.
The comprehensive credit reporting changes came into effect on 12 March 2014 as a result of the changes in the Privacy Act.
The provision in the Act means that credit providers will be able to share a broader range of information about your credit history to credit reporting agencies such as Veda, Dun & Bradstreet and Experian than they are able to share before.

The changes in a nutshell

Before 12 March 2014:
A "default" is listed on your credit file for being late by 60 days or more and on the amount you owe over $100.  This stays on your history for 5 years.
After 12 March 2014:
A "default" is listed on your credit file for being late by 60 days or more and for amount you owe over $150.  This stays on your history for 5 years.
Before 12 March 2014:
Your repayment history is not listed.
After 12 March 2014:
Your repayment history is reported when you’re five or more days late in paying. This stays on your history for 2 years.
Before 12 March 2014:
Opening dates/ closing dates/ account limits are not listed.
After 12 March 2014:
Opening and closing dates as well as limits are now listed.

Some of these changes will make it easier to obtain loans.  Some of them will make it harder to get loans, especially the repayment history being listed.

What it means to you as a borrower

The changes could positively or negatively impact you depending on how you manage your credits.
Changing to a comprehensive credit reporting system will help give lenders a better overview of a person’s financial situation and reveal more about an individual’s payment habits. This means that lenders can distinguish between high and low risk borrowers easily and potentially offer more competitive financial products to lower risk borrowers.

This means that when refinancing existing loans, for example, lenders may no longer have to ask to see loan statements as much of the information contained in these will be available via the credit report. This will improve turnaround times considering that delays with home loan applications are often due to outstanding statement information.

5 ways to improve your credit score

Veda offers a few simple steps that people can take to influence their credit report and VedaScore.

1. Pay your loans and bills on time – paying your personal loans, mortgages, credit cards and utility bills on time does matter, so overdue debts are not recorded on your credit file.

2. Do your homework before applying for credit – do your research to compare providers before making your application for credit. Making a number of applications within a short space of time will be recorded on your file and is not always looked upon positively by lenders, as it may be an indicator that you’re in credit stress.

3. Check your credit report well before you apply for credit or a loan – this may give you an idea of whether your application will be successful.

4. If you move house, notify lenders – advise lenders and utility providers of your new address so they can re-direct bills to your new address. If you don’t pay these bills, a credit infringement or overdue debt could be listed on your credit report.

5. Keep track of your credit record – proactively manage your personal credit report by regularly checking what your credit report looks like and get alerts on any changes made to your credit report.

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