Changes to credit reporting
Since 1991, the Privacy Act has meant that Australia has a ‘negative credit reporting’ system. This means your credit report can contain ‘negative’ information about your credit history (for example, it can contain information about your notified defaults, as well as each application for credit) but it cannot contain any information that directly shows you have managed your credit well.
The law about the credit reporting system in Australia is changing. This will happen in March 2014 when changes to the Privacy Act come into force.
From that time, Australia will introduce what’s known as comprehensive credit reporting. Many countries around the world including the United States and United Kingdom already have some type of comprehensive credit reporting system, although the exact rules about what information can be in the system and what the information can be used for vary widely depending on the country.
The changes in Australia will, over time, allow licensed credit providers to access more comprehensive information that can help them make better lending decisions.
In the previous negative credit reporting system, your credit report would have shown that you had made applications for consumer credit or commercial credit (that is, credit for business purposes if you run a business) – but not whether the credit you applied for was approved or not. If you were given credit, your credit report also wouldn’t have shown whether you kept up-to-date with your repayments, but it would have shown if you had defaulted on your credit obligations.
In the new comprehensive credit reporting system, your credit report may contain more information that can be accessed by you and by those organisations specifically permitted by the Privacy Act. The Privacy Act also sets out what information in credit reports can be used for, and who it can be shared with.
What information can be included on my credit report ?
In the new comprehensive credit reporting system, your credit report may contain the following information about consumer credit that you have been given or have applied for:
- your name, or any alias you use or a previous name, date of birth, gender, current or last known address and two (only) previous addresses, current or last known employer and driver’s licence number
- information that shows you applied for credit, and the type and amount of credit that you applied for
- the date you opened your credit accounts
- the type of credit accounts you opened
- the date a credit account was closed
- the maximum amount of credit available to you under each credit account (and if you get a credit limit increase on a credit card, for example, the new credit limit can be shown)
- basic information about the terms or conditions relating to the credit repayment (such as any maximum term and whether payments are interest-only or principal and interest)
- the name of your credit providers and whether they hold an Australian credit licence
- " default information" (that is, a payment of more than $150 that is at least 60 days overdue and for which you have been served with at least two notices requiring payment)
- information that shows you have paid the full amount of a default , and the date you paid it
- information that shows that, because of a default , you have entered into a new or varied arrangement with that credit provider (or another credit provider )
- information about whether monthly repayments have been paid on time over the past two years (this information can only be supplied and accessed by credit providers that hold an Australian Credit Licence or by an organisation that is considering providing mortgage insurance for a home loan you have applied for)
- publicly available information about your history and activities in relation to consumer credit
- a credit provider’s opinion that you have fraudulently attempted to get credit or fraudulently evaded your obligations to repay credit, or that you do not intend to comply with your repayment obligations (after taking steps to contact you over a period of at least six months and failing to do so)
- court judgements about credit provided to you (or that you applied for)
- information about a bankruptcy, a debt agreement or personal insolvency agreement.
In addition, in the new comprehensive credit reporting system, your credit report may contain information that shows you have applied for commercial credit, and the type and amount of credit you have applied for.
You will also be able to see which credit providers have requested copies of your credit report .
The comprehensive credit reporting system should, over time, give credit providers a clearer and more accurate understanding of your ability to repay debts. For instance, if you’ve had trouble making repayments in the past, this may be balanced with information that shows your repayment behaviour has changed since then, and you have more recently been making your repayments on time.
People who have not previously had a credit history, for example because they have only recently turned 18 or have never applied for credit or a loan can now have more information in their credit report . The first loan or credit card they obtain from a licensed credit provider can allow positive information about their repayment habits to be part of their credit history.
Information that will not be on your credit report
The following information will not appear on your credit report , nor will any other information that is not specifically permitted to be included under the Privacy Act:
- religious or philosophical beliefs
- health information
- genetic information
- racial or ethnic origins
- political opinions
- sexual orientation
- membership of professional associations or trade unions
- criminal record
- credit account balances.
One late payment on your credit report is generally less serious than a default .
In certain circumstances, a late payment will appear on your repayment history information and shows that you were overdue in paying your credit card, mortgage, personal loan or other credit product you hold with a licenced credit provider . The repayment history information will show you are overdue when you have not paid your account on time (or within a grace period of not less than 15 days).
The occasional late payment on a typical person’s credit report , for example caused as a result of being on holidays or overseas or simply forgetful, may be offset by the overall positive history of paying most accounts on time.
However, if you have a pattern of late payments this may lower your credit worthiness - although each credit provider will have different criteria for approving credit.
It is important to remember that only credit providers with an Australian credit licence can report and obtain this sort of repayment history.
A default on the other hand is always a more serious issue. From 12 March 2014, a default can only be recorded on your credit report if the payment is more than 60 days overdue, is more than $150, and you have received written notifications. For more details on what is required before a default can be recorded, go to Introduction to Credit Reporting.
As a guarantor, your credit report will include the same information as any other individual - your name, address and date of birth, and perhaps driver’s licence details. It will have details about loans you have taken out or credit you have applied for.
If you have offered to be a guarantor, your credit report can also include information about a credit provider having requested a copy of your credit report to consider your suitability.
If the borrower does not meet their payment obligations, and you do not meet any demand for payment, this failure to comply with the guarantee can be included as a default in your credit report .