Back in 2014, you probably heard a huge hubbub about comprehensive credit reporting. People were excited. Our credit files were going to show more information and this information was going to be good.
With the announcement of positive credit reporting becoming government mandated by July 2018, now has never been a better time to get your credit score. More importantly, your comprehensive credit score.
It was a move to a more US-style type of credit reporting that was going to give a better picture of someone's overall credit position – not just the payments they had missed or the defaults they'd made, but the payments they had made on time as well.
So, whatever happened to it? And if it didn't happen then, what stopped it, and is it happening now?[/fin hide]
First, what is comprehensive credit reporting?
Comprehensive credit reporting (CCR) is a positive style of credit reporting that was introduced in Australia in March 2014. After this date, your credit file can also display the following information (along with the negative information, such as missed payments and defaults that it showed before):
- Type of credit account you applied for
- Amount of credit you applied for
- Date you opened a credit account
- Type of credit account you opened
- Date you closed your credit account
- Maximum available amount of credit available under each account
- New and previous amount of credit available
- Conditions relating to repayments
- Details of monthly repayments over last two years
- Information detailing default agreements
Is this the same system that is in the US?
The Australian credit score system and the US credit score system are in no ways identical.
The US system of credit reporting is much more far-reaching in terms of the aspects of US residents' lives that it affects as well as the data points it considers to calculate the score. The US score is also much more definitive in its calculation. There is a certain percentage that is affected by payment history (35%), money owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%).
Australian credit scores are not outlined for us nearly as neatly and we have no way of knowing whether our scores are calculated using similar percentages. All that Australians have to work with are the factors that can affect our credit scores.
Will I be able to see comprehensive data on my credit report?
This information isn't available to the majority of Australians yet. This doesn't mean that the information isn't available or that credit providers haven't been collecting it, it's just that CCR is taking longer to implement than originally anticipated.
When will this data be available?
Technically, the data is available. Credit providers can share data with credit bureaus such as Equifax in private or public mode. Public mode means that the data will be visible on your report while private mode refers to providers sharing data as a preliminary testing step, so it will not be listed on your file.
In an April report, the Australian Retail Credit Association (ARCA) released data that showed only "small volumes" of credit providers are sharing CCR data in public mode. The report showed that 34.4% of credit accounts now have CCR data in private mode.
Does this mean we should expect CCR data on our reports soon?
ARCA's report shows that the more than one-third of credit providers sharing data in private mode show that they are at a "relatively advanced level of technical readiness" to implement public credit data sharing.
The majority of these credit providers are banks (3.55 million of 10.1 million total accounts) followed by finance companies (2.65 million) and international banks (2.18 million).
While the providers are at an advanced stage, this doesn't give us much of an idea of when we might see payment history, among other data, appearing on our credit files. The regime was introduced in 2014 but participation was voluntary.
Speaking to the Australian Financial Review, chief executive of the ACRA Kim Jenkins said that due to the low percentage of voluntary participation by credit providers, making participation mandatory was a realistic possibility.
What are the benefits of comprehensive credit reporting?
There are a number of benefits that have been touted as coming with CCR:
- Credit providers will have more information at their disposal to make lending decisions, leading to fewer defaults
- Increased competition between lenders leading to better products
- Lower interest rates due to increased competition
- Lenders that offer risk-based pricing, such as peer-to-peer lenders, will be able to make more accurate lending decisions
If you're in the market for credit, check if your score could qualify you for a better rate.
Will our credit score system ever be exactly like America's?
As we mentioned above, the move towards CCR will not make our credit scores exactly like America's. However, the move to a more comprehensive style of reporting could signal a more American-style system down the track.