Positive Credit Reporting and how it can affect you

Positive Credit Reporting, also known as Comprehensive Credit Reporting, is the method Australian lenders are currently using to assess a potential borrower’s credit history when processing a loan application. Lenders share this credit data with credit bureaus, who make this data available to other potential lenders to help those lenders determine the risk of lending to that borrower.

What is Positive Credit Reporting?

Up until March 2014, Australia used Negative Credit Reporting, which meant lenders based their assessments of a potential borrower applicant solely on whether they had any negative credit recorded on their credit history. This would include defaults, court judgments and bankruptcies.

Positive Credit Reporting includes information about current accounts held by a borrower, date of payment of any defaults and how well the borrower manages their regular repayments, whether they are regularly on time or made late.

Benefits of Positive Credit Reporting

Positive Credit Reporting helps give the lender a much more rounded overview of an individual’s credit profile, rather than just focusing on credit applications, defaults and other negative events. Not only does this benefit the lender, but it also gives borrowers the power to demonstrate their credit worthiness and manage their credit profile.

Positive Credit Reporting can also help clients who are looking for a better deal on products, such as personal loans as some lenders will provide a more favourable interest rate based on their credit score.

How Does Positive Credit Reporting affect you?

Positive Credit Reporting affects you by disclosing more personal information about their credit and accounts to lenders. This includes:

  • Account open and close dates
  • Type of credit account – credit card, business or personal loan
  • Credit limit – the limit of credit you have available to you for this account
  • Monthly repayment history – this reflects whether you have been meeting your financial commitments on time

If you have managed your finances well, the information contained in the Positive Credit report will be favourable when applying for a loan. However, if you have made late repayments on accounts or have high credit limits on accounts without a justified income, then this could cause issues for you with potential lenders.

How to Improve your Credit Score

If you have a bad credit score or are seeking to improve your current rating, here’s some tips:

  • Limit the use of credit cards
  • Automate bill payments – this will help avoid late payment fees and defaulting on payments.
  • 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 so.
  • Use a broker to do the work before applying – each time you apply for credit, this will show up on your credit report, so when applying for a loan, speak to our brokers to ensure you get approved the first time.

Positive Credit Reporting is a useful tool for people who manage their finances well, but just a few slips could result in a detrimental credit report. If you  would like to review your credit score, get in touch with Launch Finance today.