Mike Laing

Research from credit information website, CreditSmart.org.au, has revealed that one year on from the adoption of Comprehensive Credit Reporting (CCR), most Australian consumers are still unaware of the changes that are impacting their credit health, and may not know how it can impact their future credit applications.

The research found that in the last 12 months, only one in four consumers checked their credit report. More worryingly, consumers who are struggling with their credit health said they were just as likely to seek advice from credit repair or debt management services as they would from their lender or free financial counsellor.

“Consumers are still largely unaware of credit reporting, what information is contained in their credit report, and what that means about their borrowing behaviour and overall credit health,” said Mike Laing, CEO of the Australian Retail Credit Association (ARCA), which founded CreditSmart.

“Our research has found that while awareness has actually increased 11% from last year, less than 1 in 3 consumers are aware that credit reporting has changed. Importantly however, awareness is higher among those with a real need to know – with one in two consumers who are planning to make a significant purchase in the next 12 months being aware of the changes,” added Mr Laing.

The rollout of comprehensive credit reporting has accelerated rapidly in Australia since last year, with more data shared than ever before. By September this year, comprehensive credit information for 80% of consumer loan accounts will be available.

“CCR allows lenders to share and view more detailed credit information about consumers to provide a clearer view of a consumers’ credit history. This is a positive move for consumers who have a strong history of making payments on time.” added Mr Laing.

Consumer awareness highest for users of riskier credit products

According to CreditSmart, credit cards make up the majority of accounts currently in the CCR system at around 87%, followed by mortgages at 9%.

Yet, people who hold these mainstream types of accounts are the least aware of the changes to credit reporting and may not be aware of the value it adds to their credit history, if they have a strong record of making payments on time.

It was also found that those consumers with products that are sometimes seen as riskier, such as leases for household goods (61%), cash loans (54%) and payday loans (79%), plus personal loans (55%), are all far more aware of the changes to credit reporting. ^[1] This could indicate the users of those products have been given more information about the changes, or that they have taken more time to understand the changes.

Consumers using these riskier products also rated their credit health as significantly worse than users of home loans and credit cards.

Interestingly, Buy Now Pay Later (BNPL) users have relatively low awareness of credit reporting changes despite significant numbers rating their credit health as poor.^[2]

Consumer awareness a work in progress

Awareness of credit reporting changes is not the same as understanding the detail behind their credit report, according to Mr Laing.

“It is easy to understand how consumers may become confused about what’s important when it comes to credit reporting and their credit health. There’s a lot of information out there and it’s important to bring it back to a simple, straightforward message.

“We want consumers to be aware of the importance of their credit history to their credit health – and how that history may impact their financial future. The steps are to understand how the credit reporting system has changed, to get your credit report to see your credit history and to manage the credit that you have responsibly” added Mr Laing.

For more information on the changes to credit reporting and where to get your free credit reports you should go to www.creditsmart.org.au, which provides clear information on the credit reporting system to assist consumers to optimise their credit health.

Key points:

• 7 out of 10 consumers are still unaware of the credit reporting changes one year on from lenders going live with CCR
• People struggling with their credit health are just as likely to seek financial advice from credit repair or debt management services as they would from financial counsellors or their lender
• Consumers using payday loans, short-term cash, and Buy Now Pay Later services are more likely to be struggling, or have lost control of their credit health
• However, half of those planning a significant purchase in the next 12 months are aware of the changes, and overall awareness is up 11% from 2018 (17% to 28%)

The post Aussies’ awareness of changes impacting credit health still a work in progress appeared first on AdviserVoice.

Mike Laing

Consumer education website, CreditSmart, has confirmed NAB has started sharing information on mortgage payments with credit reporting bodies under the Comprehensive Credit Reporting (CCR) regime, with other major banks to follow suit.

In September last year, a major CCR milestone was achieved with all Big Four banks sharing 50% of their customers’ ‘positive’ credit information – largely Credit Cards and Personal Loans accounts. With a commitment to supply the remaining accounts by September 2019, NAB is taking the lead having now started sharing mortgage accounts from this month.

Mike Laing, CEO and Chairman at the Australian Retail Credit Association (ARCA), which founded CreditSmart, said: “Having a home loan is a major financial commitment, so the inclusion of mortgages in CCR data is a positive move for consumers who have a strong history of making payments on time.

“Demonstrating strong credit health in the past by being disciplined with repayments will be an advantage to consumers looking to take out another mortgage or a personal loan. This is particularly important as banks adopt more stringent lending processes following the Royal Commission,” he added.

What should consumers do?

Consumers who are keeping a close eye on their credit history will see these new account details reflected in their credit report.

“Under the new system, up to two years of monthly home loan repayments will be on your credit report. You should check your credit report at least once a year to make sure there are no errors or inconsistencies because there is a high chance this will affect your next application for credit.

“Another point to note is that your mortgage loan limit will be reported and visible on your credit report. This along with the limits on other accounts you may have (such as credit cards) and your repayment history will give lenders a good view of the overall amount of debt you have been able to handle,” he continued.

More comprehensive credit information gives lenders a better picture of whether you are in a position to take on new debt, and whether you manage your debt responsibly. It means that if you’ve been regular with paying your accounts, that could increase your chances of getting a loan and a lower interest rate.

For information on how to optimise your credit health, go to the CreditSmart website, set up by credit experts to help you understand how recent credit reporting reforms affect you.

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