Three in five Australians are oblivious to credit reporting changes
- Unaware: 60% don’t know credit providers are sharing more of their personal financial data
- Misconceptions rife: 87% incorrectly believe paying their utility bills on time improves their score
- Applying blind: 65% have never checked their credit score, with big four customers the worst
Melbourne, 20 August 2018: Three in five Australians are unaware their credit score may have already changed as a result of credit reporting regulations, potentially risking their next loan application or ability to negotiate a better interest rate, research from Australian credit bureau Experian has revealed.
In response to legislation proposed by former Treasurer Scott Morrison, credit bureaus will be supplied with at least 50% of the four major banks’ rich customer credit data by September 2018, rising to 100% by September 2019. Simultaneously, non-big four lenders have also begun voluntarily sharing varying types and volumes of data with Australia’s three CRBs.
All this new data, known as comprehensive credit reporting (CCR) data, means lenders will be able to see for the first time what type of credit accounts people have, their credit limit and whether they have been paying their loans back on time.
During this transition period, as more lenders start sharing positive data, we can expect to see credit scores fluctuate – most pronounced among consumers with multiple accounts across multiple lenders, with big four customers likely to see a change sooner, according to Poli Konstantinidis, Experian Australia/NZ Executive General Manager, Credit Services and Decision Analytics.
While fluctuating credit scores should not be a cause for concern, it is important to frequently check your credit scores to better understand your financial situation, Mr Konstantinidis explains.
“Confusion and lack of awareness about credit score changes mean borrowers with a strong credit history could be missing out on their chance to access lower rates of interest,” Konstantinidis said.
“Most concerningly, our research shows the people most likely to see the impact of changes to their credit score sooner rather than later are also the ones most in the dark.”
The survey found 65% of big four customers and 53% of those with multiple accounts across multiple credit providers didn’t know more of their data was being shared, compared to 52% of non-big four customers. Similarly, non-big four customers were 10% more likely to have checked their credit score.
“From our experience in the 19 other countries where we operate credit bureaus, positive data sharing is a much fairer system and provides consumers with better credit opportunities. It doesn’t just help those with strong credit scores, it also means those without a long credit history, young first home buyers for example, can build one quicker than before.”
“Through greater visibility of individual circumstances, credit providers are better positioned to lend more responsibly, making informed case-by-case decisions with a holistic view of the customer’s repayment history at hand.”
Konstantinidis said overseas markets that transitioned to CCR ahead of Australia have seen significant improvements to the lending environments for consumers. In the US, CCR enabled an uplift of up to 40% in access to credit among younger and underserved borrowers[i] while credit card lending in Hong Kong increased by almost 10% in the two years following their introduction of CCR[ii].
The nationwide survey of more than 1,000 Australians revealed in the Know the Score research report, found misconceptions about what data impacts credit scores remain rife – strikingly similar to last year despite widespread news about positive data sharing.
“More than ever before, your financial history counts when you apply for credit. This isn’t about the value of the car you drive or how big your recent pay rise was – Experian urges consumers to pay credit cards and loans on time, as lenders may now consider this when deciding whether or not to approve your credit application,” Konstantinidis said.
Mike Laing, Executive Chair of ARCA, agreed that it is very important for consumers to understand the changes to credit reporting and how to optimise their credit health. “Going forward, consumers’ credit reports will become a personal asset which will hold them in good stead for when they need to take out a loan or mortgage.”
“I am delighted that around thirty organisations, including Experian, have made significant financial contributions to support the CreditSmart consumer education campaign and are also developing educational materials of their own for consumers. I encourage consumers to visit the CreditSmart website if they have further questions, including on how to optimise their credit health, or get errors on their credit report fixed for free”, Laing said.
Konstantinidis said Australians should check their credit report regularly and they can do this at any time free of charge by contacting Experian or by creating a free credit profile with Experian partners like CreditSavvy which help consumers monitor their Experian credit score.
About the research
The survey was conducted via Pure Profile in April 2018 using an online survey method. The survey was completed by 1,011 Australians representative of the nation aged 18 and over. The annual survey was last completed in March 2017 by 1,003 Australians representative of the nation as a whole aged 18 and over.
[i] US: 2010 research from the Organisation for Economic Co-op
[ii] Hong Kong: 2006 Hong Kong Monetary Authority
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