What the new credit reporting laws mean for you
New credit reporting laws will require banks to pass on more detailed information about customers’ credit history to credit agencies.
Under the new ‘Comprehensive Credit Reporting’ laws, banks must provide details such as when an account was opened and closed, types of credit used, credit limits, financial hardship information and up to 24 months of repayment history. Before this, banks only had to report on ‘defaults and serious infringements.’
What does this mean for borrowers?
The Australian Banking Association welcomes these new laws with chief executive Anna Bligh saying that it will give customers greater choice and more opportunity.
“This is also good news for customers experiencing financial difficulty. Now, more context will help ensure customers’ credit histories are more accurate and reliable,” she said.
The pros and cons
Mozo Banking Expert Peter Marshall weighed in on the new laws and suggested that overall they are an improvement. But there are some cons to consider.
“People who are doing well with their finances may find it easier to get credit and possibly better rates,” he said.
“For those who struggle financially, they may find there are more products that penalise them with worse rates, and those are the people who can least afford to pay more for financial services.”
Marshall said that an upside for people who are struggling financially is that they may be able to improve their credit rating faster. This is because things such as paying bills on time are taken into consideration with the new laws.
Why does my credit score matter?
When it comes to finances, your credit score (or rating) matters because it tells potential lenders how reliable a borrower you are. If your credit score is low, you may not be approved for a credit card, a personal loan or a home loan. Or you may be approved with a much higher interest rate, than if your credit score was a bit healthier.
Want to banish your debt and improve your score? Read our article 7 ways to cut credit card debt in 2021 for some helpful tips.