Australia’s credit reporting system changed significantly as a result of legislative reform.
It’s important that you’re aware of these changes as they affect what’s on your credit report and what information can be accessed by credit providers about your credit history.
In the new comprehensive credit reporting system, your credit report may contain more information that can be accessed by you and by those organisations specifically permitted by the law.
Importantly, your credit report will show whether you've made your payments on time for your accounts like your credit card, home loan and personal loan. In return, you have more consumer rights relating to credit reporting and the information contained in your credit report.
What you need to know about comprehensive credit reporting
Over time, credit providers will get a clearer picture from your credit report, of your ability to repay your debts, which will allow them to make more accurate and better informed lending decisions.
More information on your payment behaviour makes it easier for the credit providers to better match the credit you applied for to your needs and circumstances – even for borrowers with a limited history of borrowing. This will reduce the risk that you commit to repay more credit than you can afford.
These changes will take time. Some credit providers don't use credit reports at all to make their credit decisions. Others will continue to use the current 'negative' credit reporting system. Credit providers that are allowed to use comprehensive credit reporting, may adopt it at different times.
You ultimately have more control over the information in your credit report. For example:
- Credit providers and credit reporting bodies are obliged to take positive steps to help you get incorrect information in your credit report fixed. If your correction request is not resolved, you can access internal and external dispute resolution processes.
- Credit providers and credit reporting bodies must respond to complaints within set time periods, and if a complaint remains unresolved or the response is unsatisfactory, you can speak to an external dispute resolution scheme or be referred to the Office of the Australian Information Commissioner – an independent government agency.
- Credit providers risk very significant fines if they misuse the information in your credit report
- Credit providers cannot use information in credit reports that they get about you to market products and services.
- You have more options to help protect your personal and credit information if you have been, or may have been, the victim of identity theft or fraud.
What if I have no credit history
It might sound a bit strange, but it can make it more difficult to borrow money or buy things on credit if you’ve never applied for credit before (or at least in the last five years). This is because your credit report won’t exist or because it may not have any useful information (as old information falls off your report after a number of years).
Credit providers use the information on your credit report to predict whether or not you’ll repay the money owed to them. If you don’t have a credit report or there’s not much information on it, then it will make that prediction a bit harder.
This can impact either young people who haven’t yet obtained credit, or people later in life who haven’t accessed credit for a long time because, for example, the bills are always in their partner or spouse’s name.
So, what’s the answer?
- Firstly, this problem is not as bad as it used to be. Many credit providers have recognised that someone can be a great customer even if they don’t have a credit report, and have introduced special processes to deal with customers who don’t have an established credit history.
- Secondly, you probably shouldn’t rush off and apply for heaps of credit just to have a credit report created. If, like most Australians, you apply for a post-paid mobile phone contract, this will probably mean that a credit report will be created in your name. This allows you to start your credit history.
If you think you might want to apply for a credit card or personal loan, lenders may be particularly cautious if you don’t already have a credit report (especially if you’re a bit older and would normally be expected to have had credit before). However, they will usually take a lot of comfort if you are an existing customer. Before applying for the credit card or personal loan from a bank or credit union, it’s a good idea to open up a transaction account and make regular deposits into the account. This goes a long way to show the lender that you’re going to be creditworthy.