What do the upcoming changes in credit reporting mean for you?

Online banking devices used for credit score and credit reporting in graphic cartoon style

Changes in how credit reporting is done are set to take effect on 1 July, 2022. But how will they impact you?

These changes relate mostly to the recording of financial hardship and how that information is stored and shared.

With it having been an intense few years for many Aussies, the changes enacted by the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019 coming into effect should be a welcome change.

What is credit reporting?

Whether you’re applying for a home loan or a new credit card, any line of credit requires the provider to check your creditworthiness. With your personal information protected by the Privacy Act 1988, this is conducted via a third party.

The comprehensive credit reporting model means that the information provided to lenders isn’t just missed payments and outstanding debts but also your record of on-time and in-full payments.

With this, your credit score is calculated to summarise your credit history. A poor credit report and low credit score - or a lack of credit history - can potentially lead to rejections for some lines of credit. Put simply, it can affect your ability to borrow money.

What’s changing on the 1st of July?

If you have had a financial hardship agreement with a provider - where, say, your repayments were adjusted due to an unexpected situation - this agreement can now be noted on your credit report.

Rather than showing missed or adjusted repayments, the reporting will look the same and these repayments will be flagged as related to a special arrangement.

The changes also limit the circumstances in which a lender is able to access the financial hardship information. This information cannot be included by credit reporting bodies when calculating a credit score, nor can it be used as the sole basis for closing down a credit card.

Importantly, financial hardship information will be deleted from your credit report after 12 months, helping to prevent the amount of time a temporary setback hangs over you. Previously this information was stored for 24 months.

For those impacted by COVID-19-related work shortages or extreme weather events, as well as life-changing personal circumstances, these changes could make a world of difference.

With your credit report in tow, find our highlights for Australia’s best personal loans and Australia’s best credit cards. Looking to bring up your credit score? Read our guide to improving your credit score.