Time is ticking...will the banks move to a positive credit reporting model?
It’s been two years since changes to the Privacy Act were made in 2014, which meant that banks and credit reporting companies could begin collecting greater information about a customer's financial situation. However, the majority of banks are still yet to adopt this new positive credit reporting model and are instead sticking to negative reporting.
So when will they finally make the move? According to Luke Keller, CEO of getcreditscore.com.au, the transition to comprehensive credit reporting is “still in its early stages” and it will take some time for the larger banks to fully adopt the model due to their scale.
“As expected some of the smaller financial institutions have been the first movers to supply comprehensive credit reporting data. I think that once one of the larger banks fully adopts comprehensive credit reporting the other banks will follow shortly afterwards,” he explained.
What is the positive credit reporting model?
As described by Keller, the positive credit reporting model “gives a more complete picture of an individual’s credit situation.” It includes additional data such as:
- Account open date and close date
- Type of credit account such as a credit card or personal loan
- Credit limit - this is the maximum amount of credit available to you for an account
- Monthly repayment history on credit accounts such as mortgages and credit cards
“What the move to positive credit reporting means is that more information can be included on your credit report and you can be assessed for ‘positive’ behaviours such as making your minimum payment each month on your credit card or home loan.”
According to Keller this works as a fairer system, as it provides individuals with more ways of “positively influencing their credit score” and their perceived creditworthiness in the eyes of a lender.
Tips to ensure positive credit reporting works in your favour:
1. Find out what your credit score is by downloading a free copy online, so you know where you stand.
2. Ensure you pay your bills and loan/credit card repayments on time - direct debit is a great way to do this.
3. Do your research before applying for credit and don’t apply for unnecessary credit.
4. If possible consolidate your debt.