The New Credit Reporting Changes and what it means for you

The New Credit Reporting Changes and what it means for you

As of 12 March this year significant changes have been made to the credit reporting system in Australia. This will impact anyone applying for a home loan. At present, when you make a loan application the first thing the bank does is to obtain a credit report on you from a credit reporting agency.
Prior to these changes the contents of this credit report were quite straightforward. The report would list any enquiries for loans or any other type of credit you had made and any defaults, both paid and unpaid, from the last 5 years. It also listed personal information such as your address, any businesses you have been a director of and where you have worked, all for the previous 5free-credit-report years.
With the new changes there will be much more information provided by service companies, such as banks and telco’s, to the credit reporting agencies. This new information will include the following:

1. Details of all your loans, credit cards and any other credit facilities, which includes the payment terms and history and information on when the payment was due and if it was paid on time.

2. Any missed or late payments of over five days for these credit facilities can be recorded.

3. This information will be back dated to December 2013.

These changes have serious implications if you are considering borrowing money in the near future. It will be very important to ensure that prior to speaking to your broker you have checked your credit report for any defaults. Most Australians do not have any idea what a credit report is and how to access it.

The best way to check your credit report is to go the following website called . This is the website of the main credit reporting agency, which is called Veda. This website allows you to access your credit report in the following two ways. You can either request Veda to fax you a copy of your credit report within 28 days for free or you can pay a fee and access it straight away.
By obtaining your credit report you can check if it is correct and up to date. Also, if there are missed or late payments listed on the report you can put arrangements in place to ensure this does not happen again.
The implications of these changes to the credit reporting system are thought provoking. Once the new system has been operating for a reasonable period of time it will enable banks and other credit providers to do the following:

1. Reduce access to credit for those people who have an extended history of late or missed payments.

2. Increase marketing for things such as credit cards to those people identified as having good credit history.

3. Provide different interest rates based on your credit report. This will be quite different to the current situation whereby everyone pretty much gets the same interest rate on their home loan and credit card.

Overall, these changes will not have an immediate impact on you but as time goes on and banks, telco’s and utility companies collect more information on your credit worthiness expect this to change. In future, having a clean credit report will be vital for both getting a loan and for the level of interest rate you will be charged to borrow that money.

If you need any more information, contact us here.

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