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Mike Laing
ARCA
CEO
10 October 2018

Change is well underway in Australia’s credit reporting system, but many people still aren’t aware of how to make the most of the new system, or even that the changes are occurring at all.

In the past, your credit report included whether you had a default—meaning you had fallen at least 60 days behind with a repayment— but under the new system, it can also tell lenders how much credit you have available, and how well you pay your credit card and other loan accounts.

This extra information, known as comprehensive credit reporting (CCR) data, gives lenders a better picture of whether you are in a position to take on new debt, and whether you manage your debt responsibly.

It means that if you’ve been regular with paying your accounts, that could increase your chances of getting a loan and a lower interest rate.

Despite the potential benefits, new research shows a minority of people are aware of the changes.

A study by credit bureau Experian has revealed that 60% of Australians didn’t know that credit providers were about to share more of their personal financial data. This number is even higher for customers of the big four, with 65% not being aware.

Has your credit score changed?

Your credit score is a numerical expression of your credit health based on the data in your credit report. You can find out what your credit score is by checking your credit report. You can do this any time free of charge by contacting Experian or by creating a free credit profile with Experian partners like Credit Savvy that can help monitor your Experian credit score and credit report information. As we gradually transition to CCR and more data is included in credit reports, you may see a fluctuation in your credit scores.

Releasing the findings, Poli Konstantinidis, Experian Australia/NZ Executive General Manager, Credit Services and Decision Analytics, said fluctuating credit scores aren’t a problem in themselves, but if your credit score has gone up, and you are unaware of it, you may be missing out on some important benefits. If it’s gone down, you might be unaware that you need to take steps to improve your credit health.

“Confusion and lack of awareness about credit score changes mean borrowers with a strong credit history could be missing out on their chance to access lower rates of interest,” Mr Konstantinidis said.

Why you should check you credit report

Research by CreditSmart and Experian both found at least 60% of Australians have never checked their credit report, even though it is a key document used by banks and other lenders to determine whether to extend credit to a would-be borrower.

Why does this matter?

Firstly, if your credit report shows you’ve been making your loan or credit card repayments on time, which would be reflected in your credit score, then you may be in a better negotiating position when you apply for a new loan.

Conversely, if your credit report shows you have fallen behind in your repayments, this may make it harder for you to get a loan. However, knowledge is power, as they say. If you know there’s a problem, you can do something about it.

For instance, if you’re having trouble remembering to make your payments, you could set up an automatic payment. If you’re having financial difficulty, talk to your credit provider.

Lenders are required to assess you for “hardship variation” if you ask for help. Depending on your circumstances, the credit provider may agree to change your payment terms to give you more time to pay, or to reduce what you are required to pay. This may help you get back on track, and that will be reflected in your credit report.

Many people don’t tend to think about their credit report or their credit score until they are applying for a loan, if at all – but that’s a mistake.

Now, more than ever, it’s important to get credit smart and make sure you understand the changes to the credit reporting system and the state of your own credit record – and take any necessary steps to optimise your credit health.

Digital Agency: Spark Green

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