Access to credit will fall with introduction of new credit reporting data – and it’s being collected now
27 June 2013
Credit numbers are expected to decline when more data is reported about Australian credit habits in March next year, and a consumer advocate for accurate credit reporting warns, some simple mistakes may mean it is your credit worthiness on the line
CEO of MyCRA Credit Rating Repair, Graham Doessel says this is an important time to know about Australia’s credit laws, and to be careful with how you use and repay credit.
“Australian consumers are currently under the microscope with their repayments, and if they are more than five days late with their repayments to licenced Credit Providers, that is going on their credit record now for two years and will show up as of March next year,” Mr Doessel advises.
“In my opinion, this is going to trip up many Australians. With only a 5 day grace period proposed, it may mean many Australians are unnecessarily banned from credit due to simple billing mistakes, lost paperwork and other payment mishaps,” he says.
The prediction of reduced credit numbers has been echoed by Dun & Bradstreet CEO, Steve Brown at a recent Australian Banking and Finance Conference.
Publication Banking Day reported Mr Brown as telling the conference that a contraction in consumer credit will take place following the introduction of comprehensive reporting in March. "Lenders will start to learn things about consumers that they did not know before, such as the number of late payments they make," Brown says.
And so say Citigroup. “Citigroup Australia's country risk director for consumer, CLN Murthy, agreed that there would be a tendency to reduce credit limits after comprehensive credit reporting came in,” Banking Day reports. Repayment information will be part of five new data sets to show up on your credit report as part of wide-sweeping amendments to Australia’s Privacy Act, which includes a new Credit Reporting Code of Conduct.
“Prospective lenders will be privy to your repayment habits – and the word is out that more and more information may be on the table going forward,” Mr Doessel warns. Banking Day recently reported that Mr Brown and others in the consumer finance industry will be pushing for even more data to be included in the future. “Brown said Dun & Bradstreet would like to see the inclusion of account balance data in credit files,” Banking Day reports.
The long term plans with respect to repayment history information is to be able to offset good repayment history against a default listing. The conference predicted that products and pricing structures could be developed for these borrowers.
In the meantime, Mr Doessel says there are some simple things credit-active Australians can do to make sure their credit-worthiness remains in-tact:
1. Pay on time, every time. Pay within five days of your bill’s due date to avoid a late payment notation. It doesn’t have to be a big amount to impact you. Too many late payment notations will probably mean you’re refused credit, or offered only a high interest rate.
2. If you can’t pay, actively seek help. There are new laws to help prevent you from being defaulted if you are under financial hardship, provided you get in early with your Credit Provider. So there is a new incentive to get in and work it out prior to letting your accounts go into arrears and copping a default listing.
3. Seek cautions credit limits. If you’re not using it, don’t have it is the general adage. If you take out a credit card or other line of credit, it’s probably not wise to opt for a lofty limit, but ask for an amount closer to what you intend to use.
4. Consider identity theft risks. Understand how lucrative your personal information is and take steps to keep abreast of how it can be at risk. New las will allow you to place a ban period on your credit information if you believe you may be at risk of identity theft. Acting quickly may prevent credit file misuse.
5. Check your credit file regularly. With the new information available, it will be more important than ever to check your credit file. Many people don’t know you can do this for free annually through the Australia’s credit reporting agencies and a copy is sent within 10 working days.
6. Correct credit information which you believe is inaccurate, inconsistent or unfair. To offset the new information, new laws will make it fairer for those disadvantaged individuals to access and correct their credit report.
But Mr Doessel says there will still be a requirement to work within and have knowledge of credit reporting law when disputing an inaccurate or unfair credit listing. “It is important to note, that Credit Providers and Ombudsman must act impartially and cannot advocate for you,” he warns.
He says you can start by contacting your Credit Provider yourself to alter incorrect information, or you can put your case for dispute in the hands of an advocate. “You should take steps to rectify mistakes before the information has any bearing on a credit application you may make in the future,” Mr Doessel says.