On March 12 of this year, a new comprehensive credit reporting system (CCR) came into effect in Australia, and it will change the way lenders assess risks when taking new clients.
At present, a person's credit file - the detailed collection of their financial history - is governed by the Privacy Act and only provides limited negative information, such as defaults and bankruptcies to lenders.
However under the new system, known as CCR, a much wider range of information will be available, from details of credit cards and personal loans to monthly bill repayment history.
The information will also be able to be shared among credit providers, although not with telecommunications and utility companies at this stage.
The changes are designed to provide a clearer picture of consumer behaviour, however the changes also mean companies will be able to access additional information around the types of credit, limits and how often people pay their bills on time.
For example, under the new system, if you miss a repayment by more than five days that will be marked on your file, however a default is not marked just because you missed a repayment. Credit defaults are when a payment of $150 is more than 60 days overdue. It is sobering stuff.
On a positive note, the changes will allow people to establish a positive credit rating quickly and show they have recovered from negative events. It will also mean that consumers can actively use their credit score to seek out a good deal from providers.
However people will need to remember to be vigilant with bill payments in order to keep their file clean - which could be a struggle considering 80 per cent of Australians don't keep track of their credit history.
Some handy tips for managing your credit rating are:
• Set up direct debits to ensure bills are paid on time
• Schedule loan repayments for payday
• Keep track of credit commitments and only apply for credit when you really need it
• Credit includes things like store finance so don't neglect payments on your fridge or car
• Close any accounts you don't need
• Get your bills via email and flag them to make sure they're paid on time
• If you're having trouble meeting payments, ask for an extension or negotiate new terms
• Get a copy of your credit report from veda.com.au so you know where you stand
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