Positive Credit Reporting: Positive bureau credit history proposed by Australian government

Credit Reporting

Australia’s credit history reporting system is under review by the Australian government

Positive Credit Reporting

An Act is finally before Parliament that could overhaul credit reporting in Australia – introducing a positive credit history report that could improve your chances of being able to secure a loan in this tough lending environment.

If this Act is passed it would change Australia’s credit reporting system from the existing negative report – where only defaults and negative incidents are included as a ‘black mark’ against your name, to a positive report – where you can earn ‘brownie points’ for being a good borrowing citizen. This change would bring Australia into line with the United States and the United Kingdom.

The type of things that are listed on your credit report in the current system are if you’ve failed to pay a bill, defaulted on a loan, or even made late payments. Other line items on your report show when a lender has accessed your report (for example, if you’re applying for a credit card or a mortgage, the lender will often run a check on your report). Basically, this means that for most people credit reports are fairly bland and boring documents – which, of course, is exactly what you want them to be if they only have negative information on them.

But the current system means lenders have such little information to go by when they’re assessing whether or not you are a good risk or a bad risk for a loan, that they might hold it against you if you’ve had a number of ‘credit report access’ lines listed on your report. For example, if you’ve applied for a few different credit cards, they might all show up on your report, and then start to make you look bad if you’re later applying for a mortgage.

This contrasts to the system in the US and UK where they have a positive reporting environment and individuals can build up collateral if they pay their credit cards or rent on time, or if they promptly pay off a car loan or make regular payments on their mortgage. These types of positive events are added to people’s files, so when it comes time for them to get a loan, the new lenders can see how reliable they are. This not only can improve your chances of securing a loan, it has been known to help people negotiate more favourable interest rates because they can demonstrate to their new lender that they are a low-default risk.

A win-win situation

A recent report by one of the organisations in Australia that holds people’s credit reports, Dun & Bradstreet, found that a positive credit reporting system would have far-reaching benefits for both consumers and lenders in Australia.
The study, released in May 2012 in conjunction with the Policy and Economic Research Council, looked at the data of 1.8 million Australians and found the new credit system would make lending fairer and improve access to credit for individuals and small businesses, and it would create growth in lending to the private sector.

In an era where it has been particularly challenging for first-home owners and self-employed people to access any form of credit, the passing of this Act and the improvement of credit data would provide huge relief.
We’re crossing our fingers this Act will get passed so Australia can catch up with the rest of the world and make it easier for us to show lenders how reliable we are. But while we’re waiting for this decision, why not check your credit report and make sure you’ve got a clean bill.

Steps for checking your credit report: This is what you need to do:

• Follow this link: http://www.creditcardfinder.com.au/mycreditfile-my-veda-alert.html/
• Choose the free option if you’re happy to wait ten days for your report or pay $30 if you want the information immediately;
• Enter the very basic set of personal information, such as your contact details, employer and drivers’ licence; and
• Once your report is emailed to you a few days later, run your eyes over the PDF file to you to see what lenders can find out about you.
• If there are any negative incidents recorded against your name, they will expire within five years of the event occurring (or seven years for the big ones such as bankruptcy).
• If there is something on your report you don’t think is correct, you should first contact the lender who made the listing (for example, the bank’s name might be there so get in touch with them directly). Maybe there is a payment you overlooked and changed address and didn’t realise you hadn’t paid it. If you are sure it is incorrect, you can contact the credit reporter and ask about the process of having the item removed. Sometimes unexpected black marks on your credit report can reveal identity theft or other fraudulent activity so it’s important to get straight onto it.

  Here’s to wishing you a bland and boring credit report. That is, until the days we can celebrate a positive report and start building up brownie points to show lenders just how reliable we can be.]

   

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