Two thirds of Australians unaware of credit reporting improvements
10 March 2017 – New preliminary research by Australian credit bureau and leading global information services company, Experian, has found two thirds of Australians are unaware of national credit reporting changes which enable lenders to see new data streams about a customer’s financial history.
The change from lenders sharing only negative data, like defaults and bankruptcies, to new positive consumer insights, such as a persons’ track record of paying back credit, is expected to provide more Australians with better credit opportunities while improving responsible lending practices.
The credit industry’s transition is set to be fast tracked this month in the Productivity Commission’s final report on Data Availability and Use, afterthe Commission suggesteda new 40% industry adoption benchmarkand a June 2017 deadlinein its draft report late last year.
Although the new positive data isn’t yet being actively shared amongst credit providers, it is being collected and shared with Australia’s credit bureaus, which is why all Australians need to be aware of the changes and how they will impact their future applications for credit cards, loans and mortgages.
The preliminary research results from Experian’s March 2017 nationwide survey, which analysed the views of over 1,000 Australians, highlight a concerning lack of knowledge about credit reporting.
Experian Australia/NZ Managing Director, Suzanne Steele said “Our research indicates that as many as two thirds of Australians (66%) are unaware of the comingchanges, which will see credit providers in Australia have more access to their customers’financial informationto enable more informed lending decisions.”
“It’s an overwhelmingly positive change for Australian borrowers, but it’s important they understand how today’s decisions, such as making credit repayments on time, could have a positive impact on their credit scores once lenders begin actively sharing positive historical data.”
“Knowledge is power when applying for credit, so it’s particularly worrying that 71% of survey respondents have never checked their credit score before, with the most common reasons being that they didn’t know how to (22%), didn’t know what a credit score was or didn’t care (17%).”
More quotes, background information and research results are available below.
“Experian is a strong advocate for avoluntary transition to comprehensive reporting in Australia, where credit providers share positive consumer data, not just negative, because it is a fairer system that will provide more Australians with better credit opportunities and enable credit providers to make more responsible lending decisions,” Steele said.
“Positive data sharing will reward responsible Australian borrowers and provide more opportunities to people that haven’t had the chance to build up a strong credit history of successfully repaying personal loans, credit cards and mortgages.”
“For example, positive data may help potential first home buyers who don’t have a long credit history, to be approved for finance, where previously they may have been declined.”
“Positive data sharing will also enable Australians with a strong credit history to access more competitive deals and interest rates. Positive data sharing will also assist others avoid entering into unmanageable levels of debt and getting into financial difficulty.”
“It might come as a surprise to people that today, Australian credit providers have limited visibility of how indebted a borrower is. All that they can see are the number of applications they’ve made for credit, the type of credit, the amount applied for and if they default on their payment obligations or become bankrupt or have a court judgment against them.”
“Positive data gives credit providers a 360-degree view of their customer’s financial situation, creating an environment for better decision making about the right level of debt the borrower can manage. This can reduce the number of people who default on a loan, increase competition among providers and drive down costs for all credit customers.”
“Australia and Brazil are the only two countries yet to adopt positive data sharing, out of the 19 countries where Experian operate credit bureaux around the world.”
Steele said Australians could access their Experian Credit Reportfree of charge by contacting Experian or create a free credit profile with partners like credit savvy.com.au which help consumers monitor their Experian credit score and credit file information.
Australia introduced comprehensive credit reporting in March 2014 with an amendment of privacy law to enable positive data (repayment history data) to be shared with credit reporting bureaus and so also accessed andutilised by credit providers when they’re making their lending decisions.
Many lenders are providing the new data streams into Australia’s three credit bureaus, but to date few of these lenders are ready to share the data for credit decisioning.
The Productivity Commission’s draft report into Data Availability and Use, suggested a high level of participation in positive data sharing might only be achieved by mandating participation.
The Commission’s final report, to be handed to the Australian Government for consideration at the end of this month (March2017), is expected to include a draft recommendation that industry share comprehensive credit information fora minimum of 40% of accountsby 30 June 2017, otherwise the Government should mandate its introduction by 31 December 2017.
Productivity Commission Data Availability and Use (Draft report):
Draft Recommendation 4.1
The Australian Government should adopt a minimum target for voluntary participation in Comprehensive Credit Reporting of 40% of accounts. If this target is not achieved by 30 June2017, the Government should circulate draft legislation to impose mandatory reporting by 31 December 2017.
Preliminary Experian research findings, March 2017*:
- 66% of respondents said they are unaware of the coming changes “which will see credit providers in Australia have more access to your financial information”
- Despite the lack of awareness, Australians were supportive of the changes for a variety of positive implications, including:
- That responsible people are more likely to be approved for credit 16%
- The ability to negotiate a lower interest rate based on financial history 17%
- More competition between credit providers and potential to reduce Interest rates 15%
- Less people getting themselves in bad debt positions 15%
- Australians were also supportive of the changes on the condition their data was kept secure (22%) and isn't shared with third party credit providers without their consent(18%)
- Despite the benefits, 32% of respondents said that they don’t want to share any more personal information with credit providers, with a lack of trust in the banks (18%) the most common reason, highlighting the need for greater consumer education
- 71% of respondents had never checked their credit score before with the majority citing that they didn't know how to (22%), didn't know what it was or did not care (17%)
- Less than 30% had checked their credit score before, with most checking occasionally (19%) and just 5.4% checking it regularly
*These are just a portion of the findings from Experian’s research. More detailed information from the research report will be available later this month.
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