19/04/2013 – New Credit Reporting Regime Currently Before Parliament

No, you won’t go to jail for paying your Telstra bill late. But, there is an Act currently before parliament that if implemented would overhaul the current credit reporting regime and potentially improve (or hurt) the chances of obtaining home loan approval.

What is Credit Reporting?
Credit reporting is merely information held by an independent third party about the credit worthiness or otherwise of a potential borrower/user. This credit reporting information is contained in your credit file which all applicants will have if you have a home loan, credit card, mobile phone or any other sort of credit or lease.

This “Credit File” is maintained by a company called Veda Advantage and you can get access to your credit file at any time by going to www.mycreditfile.com.au for a small fee.

What is in your Credit File?
Your credit file contains some of your personal information such as full name, date of birth, drivers licence number and current address. Importantly though it also contains information about your credit. That is, it would include;

1) Credit applications made in the past 5 years (ie, each time you applied for a credit card, home loan etc whether or not this loan was actually taken up),
2) Details of credit defaults – that is, unpaid bills and loans,
3) Details of judgments, bankruptcy and directorships.

What is Negative Credit Reporting?
The current system, as highlighted above is called negative credit reporting. That is, it only contains information on an applicant that is negative. It does not for example confirm that the client pays their existing loans and bills on time – merely only reports if you do not.

What is the Change?
The current Bill before the parliament is to change this credit reporting regime and to bring Australia into line with other G20 countries by implementing a positive credit reporting system.

This new system would result in more information available on your credit file that lenders could check to determine if they wish to lend to you.

Importantly, the system will report on the repayment performance history of:
1) Home utility bills such as electricity, telephone etc,
2) Home loans, credit cards and personal loans.

Late payment on that Telstra Bill?
Yes! The new system would record the performance history for all bills, whether or not paid on time. For those that pay their bills on time all the time, this is a great move as the banks will be able to see this and are more likely to advance you credit. For those that are routinely late in making payments on their bills, this new system may make it harder for you to obtain credit.

The moral of the story – if you have in the past not worried too much about the odd late payment on a phone or electricity bill, its time to start paying on time.