What You Need to Know About the New Credit Reporting Laws Before Applying for a Home Loan

Comprehensive credit reporting has been voluntary in Australia since 2014, however, the Australian Government has recently ordered the big four banks to participate from July 1 this year.

What is Comprehensive Credit Reporting?

Comprehensive Credit Reporting (CCR) is just that—a thorough view of your financial history, which is inclusive of all your ‘good’ and ‘bad’ financial behaviour for all future lending. This includes your mortgage, credit cards, home loans etc. With an unprecedented volume of information now being collected on individuals under the CCR, positive behaviour is also recorded against your name – no longer ignoring all the regular payments you may have made on a loan. But, with the addition of good behaviour on credit reports, it’s important for individuals to acknowledge that there is also the potential for an increased reference to any bad behaviour too – for example, under the rule revisions, gone are the grace periods for paying a bill a few days late. “This change should be taken seriously,” says Inovayt General Manager Jordan Morieson. “Previously, you could make a credit card or loan repayment a few days late and it wouldn’t really cause too many issues. However, with the introduction of Comprehensive Credit Reporting, every little payment matters. It’s a game changer.”

How to get ready for Comprehensive Credit Reporting

• Make your repayments on time. This might sound easy, but making a payment a day late may have a genuine impact on whether or not you get approved for a loan in the future
• You may want to consider setting up a direct debit or calendar reminders to ensure that you always make your payments on time
• Speak to your broker if you would like additional advice on how these changes may impact you

How will the changes impact borrowers?

While there may be some harsh consequences if you have made late payments it may not be all bad. The new data could mean that your credit score increases, which is good news if you’re looking to buy a house. There is evidence to suggest that loan approval rates are higher for countries, which has an economy operating under a CCR system. CCR may also be seen as a win for consumers because the accessibility to both positive and negative data improves the bank’s ability to assess a borrower’s genuine financial position, which encourages them to lend more responsibly and offer more competitive deals. This increase in industry competition has placed finance brokers in an even better position to identify better interest rates for their clients. You might not understand how the changes will impact your credit score, but your broker will. The time has never been better to engage a finance broker and explore how the new CCR regime will impact you and your next loan. Should you require more information or clarity on any of these topics, please contact us today on 1300 354 355.