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On July 1st this year, a new era in credit reporting was introduced, and it goes by the title of Mandatory CCR. “Uh Huh, and…” I hear you say, “what’s that and what does that mean for me and do I REALLY need to know about it?”
Well, yes, you do! It might not sound that exciting, and OK, it possibly isn’t, but it IS important for you to know about, so I’m going to tell you.
Mandatory CCR stands for MANDATORY COMPREHENSIVE CREDIT REPORTING and it’s the mandatory part is that’s the change here.
We met CCR here in Oz, back in 2014, but up until now it has operated on an optional basis. As of July 1st, this reporting has become mandatory (compulsory, non-negotiable, obligatory – they’ve GOTTA do it!) at the moment for the Big 4 banks (but still optional for other financial institutions – hmmm!).
OK, so we get that part, it’s something the banks have to do, but what is it and how does it affect me? Well, the clue is in the title, it’s credit reporting– and that means the process by which data is collected, data about you, me and the bloke next door on our payment history, our finance applications, and our financial habits overall; data like; do we pay on time, do we pay late, or have we not paid at all? Lenders then have access to this information to make decisions about whether to lend to us in the future. Oh yes, Big Brother is DEFINITELY watching!
Now lenders getting sight of our credit history isn’t new – but this new system means that they will have access to MUCH MORE INFO – and that’s the “comprehensive” part!
Whereas previously in Australia, reporting only showed up your financial black marks (a “negative” system of reporting) – the CCR moves us towards a “positive” credit reporting system – positive financial history will get as much airtime as the negative – think payments on time, paying consistently etc. etc. Apparently the aim of this is to add a more balanced view to the story of your historical financial behaviour.
So, is this a good thing or a bad thing and why exactly should you be aware of it?
Well, on the plus side, a more balanced approach giving lenders visibility of negative AND positive payment behaviour, may make them more inclined to consider lending to you. Past reliability may override a financial black mark when influencing a lender’s decision in the future. Some suggest a good payment history may even be rewarded, better deals or greater loan amount, depending on the lender.
Positive credit reporting is also likely to be a win for those with short credit histories, such as young people or those who have recently moved to Australia. Access to more information may make you look “less skimpy” and therefore, less of a risk.
BUT, as with anything that has potential benefits, there are also some concerns, and this is why it’s important to be across this stuff. One concern is that the greater availability of data could make lenders rely to too heavily on credit history and less inclined to seek further information to influence their decision – failing to ask the the WHY behind the WHAT! eg. a temporary period out of work due to illness explains a month’s missed payment.
Others are concerned that the availability of more data could lead to lenders creating “priced for risk” products ie. Offering an interest rate in direct relation to someone’s credit rating – Good credit rating = low rate of interest, bad credit rating = high rate of interest!
Other concerns are around possible security risks to the increase in available data – the more information collected could mean more information that’s vulnerable to fraud, consumer identity theft and mistakes.
But it’s important to point out that these are concerns not certainties.
So what does this all really mean for the likes of you and me. Well, the real outcome remains to be seen, but one thing IS for sure, it is now more important than ever to be aware of how our financial actions today could have influence over our opportunities of the future.
Pay attention to your payment behaviour NOW, and pay on time if at all possible, so that your credit record remains as strong as possible.
If you are worried about your credit rating, or are struggling with meeting your payments and accumulating debt, we can help. At Debt Angel Solutions we treat each person with understanding and compassion – NEVER judgement. If you would like to find out more about our services and see if they are right for you, or hear what others have to say about us, please contact us.