We would like to highlight an important development which may have a significant impact on the lending environment going forward. The mandatory comprehensive credit reporting regime will come to effect from 1 July 2018 and will require Large Authorised Deposit Institutions (NAB, CBA, ANZ and Westpac) and their subsidiaries to share your credit data to credit reporting bodies. While this mandatory reporting regime will only apply to large ADIs and their subsidiaries, the government may potentially extend the law to medium and smaller institutions in the future.
The Comprehensive Credit Reporting (CCR) which was in effect since March 2014 was initially optional but due to limited participation by financial institutions, the government announced a legislation for the mandatory comprehensive credit reporting regime on 2 November 2017. Comprehensive credit reporting allows the inclusion of additional information into your credit file which include:
- the dates accounts were opened and closed;
- credit limits;
- types of credit accounts;
- 24 months of repayment history.
As sharing of information progresses, your credit conduct will become more transparent and available to credit providers. Information like loan repayment history which was not available in the past will be available to credit provider. Although we cannot ascertain how the new information will affect the lenders’ loan approval process going forward, it is possible that lenders may reject a loan application from an applicant with no defaults but has unsatisfactory loan repayment conduct.
Going forward, we encourage you to take your payment obligations even more seriously. Although at times, you may have a valid reason for not paying certain amount in dispute, do note that a valid default or late repayment cannot be amended from your credit file. Defaults will remain in your credit file for 5 years while late repayments will remain for 2 years.
We strongly recommend that you put in place direct debit arrangements for all your loan, credit card and bill payments and ensure that the transaction account where the direct debits are paid from has sufficient balance at all times.
Please contact us if you wish to know more about how this new mandatory reporting regime will affect you or if you would like to know how you can better manage your finances.