Australians Need To Educate Themselves On The New Credit Reporting System

Post by Sharat on November 14, 2018 · Under News · Comments Off on Australians Need To Educate Themselves On The New Credit Reporting System 

If you are someone who never thinks about their credit score you certainly aren’t alone in that sort of behaviour. According to research from Experian, 65 per cent of Australians have never looked at their credit report even a single time, with customers of the big four lenders being the worst in this regard. There have been changes adopted to the credit reporting system, so now more than ever it is critical that Australians understand how important having a good credit score is.

Comprehensive credit reporting

Earlier in the year, the big four lenders migrated to comprehensive credit reporting, and despite this major shift three fifths of Australians don’t know that their lenders are now sharing far more personal information than in the past says Experian. This is likely to have far reaching consequences for Australian borrowers who are not aware of how the system is changing. The big four banks have released 100 per cent of their data to credit bureaus so many people can now expect that there will be an impact on their credit score.

Learn how the system works

For most people, this is not something that needs to be worried about, nevertheless it is important to understand how comprehensive credit reporting works because it is the first step to ensuring that if you do have a good credit score, you can maintain it. Lack of awareness and confusion about how credit scores are arrived at means that borrowers who are extremely creditworthy could end up losing the opportunity to borrow at a lower rate of interest. The people most likely to feel the impact of changes to their credit score are also the ones who don’t know how the system works.

What affects credit scores

The vast majority of Australians incorrectly believe that if they pay off their utility bills on time, their credit score will improve. There are some things that can improve credit scores. In some cases, adding new credit can improve your score and, in some cases, it can be detrimental. People who make loan repayments on time will see an improved credit score. Having too many lines of credit that are being used or too much unsecured borrowing as well as a high combined limit will negatively impact your credit score.

What doesn’t affect a credit score

Paying utility bills on time, receiving a pay raise or an increase in the value of your assets and checking your credit report will not affect your credit score. Previously a default would trigger a negative impact on your credit score, but the new model according to Experian allows people to borrow even if they have defaults on their credit report, so long as the rest of the borrower’s financial history is at par.

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