Comprehensive Credit Reporting (CCR), which is also called ‘positive reporting,’ was fully mandated in Australia last July of 2018. A year and so has already passed by, but many Australians still can’t make heads or tails of CCR’s framework.
CCR serves as a reporting system. Credit providers are required to share both the positive and negative credit data of their customers’ payment histories, which will be held on their credit file by Australia’s Credit Reporting Bodies (CRBs).
If you’re wondering about what kinds of credit information are collated on your account, you can read more here. This shared information will mainly help licensed financial institutions in generating more informed lending decisions.
In other words, credit reporting bureaus have a more holistic picture of your credit file. This is the very reason why some customers think CCR doesn’t give them an upper hand. But in reality, its benefits outweigh what Australian consumers thought as disadvantages. Here are five of the many benefits of CCR that every Aussie should know.
Table of Contents
Highlights Your Good Credit Behavior
As a result of the Comprehensive Credit Reporting (CCR) changes, Australians consumers are foreseen to be granted about $20 billion in extra loans for the next few years, according to Equifax, Australia’s largest credit bureau.
Since CCR allows credit providers to access your credit information and use risk-based pricing, these lenders can give you access to more credit and better deals. They can accurately identify your risk profile and the likelihood of your timely repayment.
Let’s say you have lower risks. Since you’re a safe bet, credit providers would more likely offer you with better deals—greater access to credit and lower interest loan rates. When you can get more credit opportunities, you can more likely pay on time. Consequently, your credit history will improve and eventually your credit score will be better (we’ll talk more about this later).
In a nutshell, this general effect of CCR can give rise to the average credit scores of Australian citizens, as suggested by Equifax’s early data analysis. That being so, the number of individuals with credit ratings that are high enough to be approved by credit providers has seen to increase up to 10% on average.
Higher Credit Scores
In addition to what was mentioned earlier, if you demonstrate diligence in meeting your credit commitments, alongside the inclusion of Repayment History Information (RHI) that are regularly reported, your credit score will undoubtedly improve in no time.
However, your credit rating is still mainly dependent on how you deal with your financing. The rule of thumb is to clear any remaining debts and pay your bill timely—this already goes without saying.
If your credit rating gets better, your status will move from one risk category into another, like ‘medium risk’ to ‘low risk’. Again, once you’re considered with low risks, you’ll be offered better terms by lenders.
Faster Recovery from Financial Setbacks
Is CCR only beneficial for people with good credit histories? No. Sure, it’s typically hard to financially be back on track after encountering defaults, collection accounts, and other negative credit behaviors.
Having said that, remember that CCR prominently highlights your good credit behavior and positive information on your credit report. Meaning, CCR can also help people with poor credit history. CCR aids you to bounce back faster from your recent and past financial setbacks.
For example, you unintentionally failed to pay a utility bill when you moved to another place some time ago. But, you have been paying your bill regularly since then. CCR will help you improve your credit history by overshadowing your previous missed payment by your recent regular payments.
Builds Credit History Faster
If you are still young or have just recently migrated to Australia, getting credit with no credit history can be almost impossible. But with CCR, things are attainable. Your credit history can now be built faster and easier, thanks to those credit information recorded on your credit profile.
Moreover, there are several ways to adapt comprehensive credit reporting. Among those ways are doing timely repayments, paying defaults, labeling all transactions, refraining from overdrawing, depositing regularly, and updating your credit file.
Drives Market Competition = More Options for Consumers
As mentioned, CCR allows credit providers to accurately assess risks, which can also prompt fierce competition between different financial institutions. More in-depth conclusive risk assessments wouldn’t only aid conventional lenders. It would also let both small, startup credit providers and financial technologies to compete.
Since there’s market competition, financial institutions would opt for marketing plans of actions that can attract more clients and eventually increase sales. These strategies include better deals and more financing options that consumers of different credit histories can benefit from. Put simply, fierce lending competition between creditor providers benefits to consumers more.
Takeaway
CCR doesn’t only benefit the consumers, but also the lenders. Australian credit providers can now do faster credit assessment, be more accurate servicing calculation, adhere to their responsible lending mandate effectively, and have certainty on their prospective clients’ current financial commitment. All thanks to the transparent and fairer system of CCR.
About Carson Derrow
