Most Australians unaware of the change affecting their credit scores
3 in 5 Australians didn't know their credit score may have changed because of the new credit reporting rules.
New credit reporting rules came into effect on 1 July 2018, but the majority of Australians may ask "what rules?" These comprehensive credit reporting "rules" will see more positive data being included on credit reports and will likely change people's credit scores as new information about their credit accounts is added.
However, according to a survey by credit reporting bureau Experian, three in five Australians have no idea these changes are taking place.
While comprehensive credit reporting has been on Australia's cards since 2014, up until recently it was voluntary. This helped to explain the woefully low participation rate of around 24%. As treasurer, Scott Morrison mandated the participation of the Big Four banks by 1 July 2018, giving them 90 days to supply 50% of comprehensive credit data to credit bureaus. The due date for the following 50% will be 12 months later.
So, is it bad that Australians don't know their credit scores are changing? Experian's executive GM of credit services and decision analytics for Australia and New Zealand thinks there are causes for concern.
“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,” said Poli Konstantinidis.
“Most concerningly, our research shows the people most likely to see the impact of changes to their credit score sooner rather than later are also the ones most in the dark.”
According to Experian's research, 65% of Big Four customers and 53% of those with more than one account across multiple providers didn't know more of their data was being shared. This is compared to 52% of non-Big Four customers. Customers not with a major bank were also 10% more likely to have checked their credit score.
“From our experience in the 18 other countries where we operate credit bureaus, positive data sharing is a much fairer system and provides consumers with better credit opportunities. It doesn’t just help those with strong credit scores, it also means those without a long credit history, young first home buyers for example, can build one quicker than before."
Konstantinidis also said that in markets such as the US and Hong Kong that transitioned to CCR, access to credit improved. In the US, CCR led to an increase of 40% access to credit for younger and underserved borrowers while credit card lending increased by almost 10% in the 2 years after CCR was introduced in Hong Kong.
While the new regime is still being introduced in Australia and the effects are yet to be fully realised, you can start making changes now to get the most benefits from the new credit reporting environment. More than ever, you need to make on-time repayments for your credit cards and loans to make sure you maintain and improve your credit position. You can also track your Experian credit score and credit report for free on finder and find out more about comprehensive credit reporting in our guide.