Credit scores in Australia are used to assess a customer’s credit risk when they apply for products such as credit cards, personal loans and home loans, and this has previously been based on negative credit events such as defaults or missed repayments on credit products, and the number of applications for credit a consumer has made.
However, Comprehensive Credit Reporting (CCR) continues to roll out in Australia, with it being mandatory for the Big 4 banks (CBA, ANZ, NAB and Westpac) to provide 50% of their credit data by July 2018, and 100% by the same time next year.
CCR requires financial institutions to share financial histories with credit bureaus that are both positive and negative. Positive credit events include those such as paying off a loan early, closing an account that is not used or make regular repayments on a credit product. In doing this, consumers can be rewarded with better deals from lenders, such as lower interest rates, or being approved for larger amounts of finance.
Some customers will have received emails from their banks explaining CCR and encouraging them to build up their credit score by paying their bills on time, not making multiple applications for credit and only applying for products they really need.
CEO and Founder of Australian Peer-to-peer personal lending platform MoneyPlace, Stuart Stoyan, says that from the perspective of brokers, “it’s really important to understand the difference between lenders and whether or not they’re using CCR information… For a lender like MoneyPlace, because we are using CCR information, 9 times out of 10 we’re offering a better rate than we would have otherwise”.
Stoyan believes that Comprehensive Credit Reporting will provide customers with better outcomes as they are able to receive offers, particularly when working with brokers, and expects consumers will be able to see “much more rapid decision-making process[es] with lenders”.
RFi Group data shows that receiving discounted interest rates is a pain point for current mortgage holders, with 2 in 3 (66%) of mortgage holders indicating this is highly important (8-10 out of 10) to them while only 2 in 5 (41%) indicate high satisfaction (8-10 out of 10) with this. Considering the role of CCR and the possibility for this to reduce the rate a customer is offered on a home loan, it may signal opportunity for both lenders and brokers to offer appealing products to prospective home loan customers.