Comprehensive credit reporting is here, but what does it mean?

When used correctly, credit cards and personal loans are a great way to build your credit rating and give you the freedom you need to make important purchases. New credit reporting rules are making it all the more important to be responsible with your credit cards especially. Here’s an overview on how Comprehensive Credit Reporting (CCR), sometimes referred to as positive credit reporting, and your credit card balance go hand-in-hand.

It’s easy to lose track of your balance and how much you’re spending when you aren’t physically handing over cash for every purchase. Reaching or exceeding your limit or missing a payment can negatively impact your credit report and credit score. And until recently, making payments on time and being responsible with your credit did little to improve your position.

All of that changed in 2017 when the Federal Government announced a new credit reporting scheme called Comprehensive Credit Reporting (CCR). CCR is a form of positive credit reporting which gives lenders (banks and other financial institutions) a complete look at a person’s credit history. It takes into account negative information (overdue accounts, defaults etc.) and credit enquiries, plus positive information around dates of accounts being open, type of credit and the limits and details of monthly repayments.

According to the Customer Owned Banking Association (COBA), the phased introduction of changes to credit reporting is good news for both borrowers and lenders.

“CCR has the potential to increase competition because lenders will have more information about consumers, which means they will be able to match credit types better and amounts to borrower capacity. Lenders will have the capacity to more accurately price credit relative to the risk profile of the borrower,” said COBA Acting CEO Dominic Dunn in a 2017 press release.

This is great, but how does Comprehensive Credit Reporting (CCR) affect me?

To understand how these changes will affect you, it helps to know how lenders assess you when you apply for a credit card or a loan. Once they receive your application, lenders will obtain a copy of your credit report to get a better idea of you are as a borrower.

A credit report is a record of your credit history and contains information around how many times you’ve applied for credit (including credit cards) your repayment history and how much debt you have – among other things. Credit reporting bodies compile your credit history to create your credit report and give you a credit score. Lenders then use to assess your creditworthiness, which is just a fancy way to compare you against other borrowers.

Lenders will use this information, along with the details you provided on your application, to decide if they will approve your credit application and how much they’ll lend you.

The positive reporting means that when you make a payment on time, you’re actively working to improve your credit rating, which can make it easier to get additional and cheaper finance later on.

Credit card debt management tips

Consider a low rate card: They won’t have the frills of cards with a higher rate, but a low rate card is a great option if you’re looking for a credit card in its simplest form. The UniBank low rate credit card* for example comes with an introductory rate of just 7.90%pa for the first six months and an ongoing rate of 11.50%pa.

Balance transfer: If you’re going to consolidate a few credit cards into one, think about closing the other cards so that you don’t start to build up more debt on additional cards. You can transfer your existing balance onto the UniBank low rate card and enjoy the introductory interest offer*.

Make regular payments: Paying off your card in full every month means you won’t pay any interest on the balance. If you’re unable to pay your balance off in full every month, consider making more than just the minimum repayment to help reduce the amount of interest you have to pay.

Monitor your account: It’s easy to fall into an out of sight, out of mind trap when you’re able to tap and go quickly. Regularly checking your account also means that you’ll notice if there are any un-authorised payments and get them resolved sooner.

Review your credit limit: You might like the idea of having a higher credit limit for use in emergencies, but knowing that you have extra credit available could lead to spending more than you need to. Plus, having multiple cards with unused limits could also negatively impact your credit score under the new CCR rules.

*Membership eligibility applies to join the Bank. All applications for credit are subject to our responsible lending criteria. Fees and charges apply. Rates subject to change. Credit Card terms and conditions apply.