Majority of Aussies support positive credit reporting, despite not knowing what it is

As Australia moves full steam ahead toward a positive credit reporting model, two-thirds of bank customers aren’t aware of what that means for their financial information, recent findings from credit bureau Experian has shown.

In the 2017 budget announcement, Treasurer Scott Morrison said the government would “legislate a mandatory comprehensive credit reporting regime if credit providers are not reporting at least 40% of their data by the end of 2017.”

This comprehensive credit reporting is expected to help borrowers with a track record of good money management secure competitive loans, while keeping less savvy borrowers from slipping into unmanageable debt.

It may also be helpful for those looking for a better deal on products such as personal loans, especially as peer-to-peer lenders - many of which assign borrowers tailored interest rates based on their credit score - rise in popularity.

“The transition to broad positive data sharing will impact borrowers in a number of ways, but importantly, credit providers in Australia will likely soon be assessing your credit repayment history,” said Experian Managing Director, Suzanne Steele.

RELATED: What does your credit score say about you?

According to Experian, despite the fact that lenders have now begun to share new positive credit data with credit bureaus, 66% of Aussies weren’t aware the changes had taken place. Most had never even checked their credit score, including those who didn’t know how to, didn’t know what a credit score is or who just “hadn’t got around to it yet.”

Aussies also weren’t quite clear just what affected their credit score and how. When it came to damaging behaviour, 70% were able to correctly identify “not paying a bill for so long a debt recovery agency contacts you,” as something that would negatively impact their credit score.

On the other hand, building up a good credit history was more of a mystery - 86% incorrectly believed paying electricity or water bills on time improved their score, while believed high value assets gave them a boost and others were under the mistaken assumption that a pay rise would also raise their credit score.

Despite all this, 70% of Aussies could recognise the benefits of a more comprehensive credit reporting method. They had a positive attitude toward sharing more data with financial providers on condition their data would be kept safe, or so that more suitable borrowers would be approved for credit. Almost a third were also interested in negotiating a better interest rate based on good financial history.

But to cash in on these benefits, Aussies need to maintain good financial habits, according to Steele.

“Positive data gives credit providers a much more comprehensive view of their customer’s financial situation, creating an environment to support their responsible lending decision around the level of debt the borrower could manage,” she said.

“Although as many as 80% of borrowers across Australia are likely to have been making their repayments on time, this new insight for lenders is why borrowers need to remain vigilant over their repayments, so they can continue to positively impact their credit scores in the future.”

Top tips to improve your credit score

• Limit your use of credit cards. Now that lenders can check in on your financial history a little more closely, it's more important than ever to make sure you’re managing your available credit wisely. A good rule of thumb is to keep your balance at no more than 30% of the limit available to you on a credit card.
• Automate bill payments. Avoid late payment fees and leaving a black mark on your credit history by setting up direct debits for all your regular bills.
• Check your credit report. If you’re like most Aussies and haven’t checked your credit score lately, then now is the time to do it. Make sure you start off on the right foot by ensuring all your details are correct and there are no mistakes damaging your credit.
• Shop around before applying. Each time you apply for credit, whether it’s a credit card, personal loan or home loan, that will show up on your credit report - so the fewer applications you make the better. That’s why you should always shop around and find the best option for your needs before signing on the dotted line. Head over to Mozo’s comparison tables to find your money match.