When lenders adopt CCR they can access a lot more information about your financial position and behaviour. This gives them more context around your finances, such as:
- The nature of your debts and credits, including credit limits on your cards.
- When your accounts were opened and closed.
- Your repayment history, including whether you made minimum repayments only, and whether repayments were made on time or not.
Theoretically, more data means more accurate decisions. Comprehensive credit reporting will let you establish a good credit rating faster. It lets good borrowers prove they are reliable enough to get a mortgage.
If you are a diligent saver with few debts CCR will make it easier for you to get a loan. But if you have a troubled credit past it is much harder to hide it. This could result in your mortgage application getting rejected, or your lender charging you a higher rate instead.
Can comprehensive credit reporting help me get a lower interest rate on my home loan?
It is hard to say for the moment. Comprehensive credit reporting has not been widely adopted by the mortgage industry. But the theory is that CCR allows for risk-based pricing, which means higher rates or penalties for borrowers with poor credit and possible rate discounts for good borrowers.
Given how competitive the mortgage market is now it is highly likely that some lenders will innovate in terms of risk-based pricing. It is already a common practice in the personal loans market.
Comprehensive credit reporting means higher credit scores and will give more Australians access to credit.
The most recent Equifax data has shown that Australians are likely to be better off under the comprehensive credit reporting (CCR) regime, which the Big Four banks have been mandated to participate in from July 2018. While only 27% of financial services accounts currently have CCR data loaded, Equifax shows that these 5.59 million Australian accounts are overall better off under the new rules.
CCR has created positive credit history for 980,000 Australians that previously had no credit history, for example. And in the case of those that already had a credit history, it is likely to improve.
For Australians that have applied for credit in the past three months, those with CCR data in their credit files have a higher average credit score. “This illustrates how CCR data provides a more accurate reflection of a consumer’s creditworthiness,” said Equifax in its State of the Industry report.