According to a survey of 1,011 Australians conducted by business data, analytics and marketing services provider Experian, 60 per cent of respondents were unaware that their credit provider is sharing more of their data off the back of the federal government’s mandatory comprehensive credit reporting regime.
As part of the CCR reforms, introduced under the National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018, the big four banks will be required to provide 50 per cent of their CCR data to credit reporting bodies by 1 July 2018. This will increase to 100 per cent in 12 months.
According to Experian’s Australia/NZ executive general manager, credit services and decision analytics, Poli Konstantinidis, prospective borrowers should be aware of the potential impact that such reforms could have on their credit score.
“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,” Mr Konstantinidis said.
“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.”
The survey also found that 65 per cent of major bank customers and 53 per cent of those with multiple accounts across multiple credit providers didn’t know more of their data was being shared, compared to 52 per cent of non-major bank customers. Similarly, non-major bank customers are also 10 per cent more likely to have checked their credit score.
Moreover, the survey found that Australians were still unclear about what data affects their credit score, with 87 per cent of respondents believing that paying utility bills on time would improve their credit score.
“More than ever before, your financial history counts when you apply for credit. This isn’t about the value of the car you drive or how big your recent pay rise was,” Mr Konstantinidis added.
Further, Mike Laing, executive chair of the Australian Retail Credit Association (ARCA), noted the importance of understanding changes to credit reporting.
“Going forward, consumers’ credit reports will become a personal asset which will hold them in good stead for when they need to take out a loan or mortgage,” Mr Laing said.
Mr Konstantinidis also lauded the benefits of CCR, citing the positive effect it’s had on consumers in foreign markets.
“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,” the EGM said.
“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.
“Through greater visibility of individual circumstances, credit providers are better positioned to lend more responsibly, making informed case-by-case decisions with a holistic view of the customer’s repayment history at hand.”