Know the score: how positive data could impact your next credit application - Experian
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Know the score: how
positive data could impact
your next credit application
1
Credit applications
and your data
When you apply for credit Until the reform of the Privacy Law in 2014,
credit providers based their assessments of
in Australia, the credit you as a potential borrower on whether you
provider will usually ask for had any negative information on your credit
your permission to obtain report. The information included was limited to
basic things like the number and type of credit
and access the information applications you had made (but not whether
on your credit report. The they were approved or not) and details of any
information helps the credit overdue debts, defaults, bankruptcy, or court
judgments against you.
provider determine if you can
manage to repay the loan and
therefore process a decision
to approve your application.
Positive data now
increasingly available
Also known as Comprehensive Credit 2018’s legislation fast-tracks Australia’s
Reporting (CCR), positive credit reporting position in the global credit industry, in line with
makes it easier for lenders to make a more many other developed nations like the UK
comprehensive assessment of your credit and the USA, where borrowers with strong
history when you apply for credit. Credit reports credit histories have long used this information
now include information about the current to seek out better credit offers.
accounts you hold, what accounts have been
In fact, overseas markets that transitioned to
opened and closed, the date that you paid
CCR ahead of Australia have seen significant
any default notices, and how well you meet
improvements to the lending environments
your repayments.
for borrowers.
In the US, CCR enabled an uplift of up to 40% in access
to credit among younger and underserved borrowers.
In Japan, the probability of delinquencies of 60+ days reduced by
34%, according to the Policy and Economic Research Council.
In Hong Kong, credit card lending increased by almost 10%
in the two years following the introduction of CCR.
2
Timing
Greater Australian participation in positive With access to richer data brought about
credit reporting forms part of Federal by these regulations, credit providers can
Government initiatives, marking a significant better identify and evaluate who to provide
milestone towards a much fairer system. credit to, based on a greater level of insights.
The big four financial institutions (ANZ, It is therefore important for all Australians
Commonwealth Bank, NAB and Westpac) to understand how their financial history
as well as some smaller lenders have impacts their next credit card, loan or
started to share their customers’ positive mortgage application.
data. Their involvement could trigger other
credit providers to follow suit.
3
How does positive credit
reporting help borrowers?
Under the positive credit reporting system, when you apply for
credit, lenders you have authorised to do so can see if you have
been repaying your credit card, personal loans or mortgages
on time over a period of up to 24 months, including when you
have paid off a credit account.
Under the negative reporting system, a credit report wouldn’t show any information
about how diligently a person had been paying off a loan, credit card or mortgage.
But when positive data is shared, a lender is able to obtain a much more
comprehensive picture of a person’s repayment history.
Key benefits of positive data sharing for consumers:
1. T
he wider availability of positive credit 3. More detailed data sharing also assists
reporting information helps borrowers others to avoid entering into levels of debt
with a strong track-record of making they may find unmanageable, which could
timely credit repayments gain better lead to getting into financial difficulty.
recognition from lenders.
4. P
ositive data can also help potential first
2. Australians with a strong credit history can home buyers who don’t have a long credit
also potentially access more competitive history but do have a sound one, to be
deals and interest rates. approved for finance, where previously
they may have been declined.
Addressing financial
hardship
The system doesn’t just help those with Working out unique agreements before
strong credit scores – Repayment History a customer defaults and receives a black-
Information mechanisms built into the mark on their credit report is made easier
positive data sharing regulations can with this broader view, helping protect
support people experiencing financial those who are suffering major financial
hardship too. changes or hardships from getting into
further debt.
Through greater visibility of individual
circumstances, credit providers are better
positioned to make informed case-by-case
decisions with a holistic view of the
customer’s repayment history at hand.
4What’s in it for the banks?
It might come as a surprise to people that Australian credit providers not
sharing positive credit information have less visibility of how indebted
a borrower is. This is because under negative reporting, a borrower’s credit
file doesn’t have information on credit limits, repayment history or account
open and close dates.
Key benefits of positive data sharing for credit providers:
1. W
ith positive information being 3. This helps reduce the number of
shared, credit providers can better people who may default on a loan,
identify and evaluate who to provide increase competition among credit
credit to, based on a broader range providers and potentially drive down
of data. the cost of credit for many customers.
2. Positive data gives credit providers
a much more comprehensive view
of their customer’s financial situation,
After CCR was introduced in Japan,
creating an environment to support
the probability of borrowers being
their responsible lending decision
unable to make a repayment for
around the level of debt the borrower
0+ days was reduced by 34%.
could manage without undue
financial pressure.
Are Australians aware of the change?
To find out where Australians were at in Although positive data sharing has
their understanding of positive data sharing, already begun, a whopping 60% of
Experian conducted large-scale research consumers surveyed were not aware
in both 2017 and 2018 to map local perceptions that credit providers plan to share
and see how they changed over the year. more of their personal financial data:
31% 32% 23% 23%
are supportive if it are also happy to share stated they didn’t want also said they
means responsible more data if it helps their data shared with are supportive only
people are more likely them negotiate a lower third parties without if their information
to be approved for interest rate or create their consent is kept safe and secure
credit, or those who more competition and
can’t afford to repay lower costs
a loan are more likely
to be declined
5Why every Australian should care
More than ever before, your financial history counts when you apply for
credit. Increasingly, lenders take into account your entire available repayment
history when deciding whether or not to approve your credit application.
Although positive data sharing is a relatively recent development amongst the majority
of credit providers, momentum is growing – especially here at the Experian credit
bureau. All Australians need to be aware that their credit repayments today can impact
their credit scores and applications for credit now and in the future.
Credit applications with positive data
Below are six examples of possible credit provider assessments of negative and positive credit
reporting data (this information can be used by lenders in combination with other considerations).
NEGATIVE DATA (ONLY)
Negative data No defaults No defaults No defaults $500 default $500 default $500 default
Paid 18 Paid 18 Paid 18
months ago months ago months ago
Initial decision
COMPREHENSIVE DATA
Negative data No defaults No defaults No defaults $500 default $500 default $500 default
Same as above Paid 18 Paid 18 Paid 18
months ago months ago months ago
Additional 1 Credit card 3 new Credit cards 1 Credit card 1 Credit card 1 Credit card 1 Credit card
account up to date account up to date 3 periods down low limit low limit 3 periods down
positive data
1 Mortgage 1 Mortgage 1 Personal loan 1 Mortgage 1 Mortgage 1 Personal loan
account up to date account up to date 2 periods down account up to date account up to date 2 periods down
1 Personal loan 1 Personal loan
account up to date account up to date
Repayment Strong Inconsistent Overall weak Consistent Consistent Overall weak
history
New POSITIVE POTENTIALLY NEGATIVE REPAIRED POSITIVE NEGATIVE
insight TRENDING OVER TRENDING CREDIT TRENDING TRENDING
COMMITTED
Potential
new decision
6So, what should you do now?
With credit providers looking Your credit score may change Always try to pay bills
back at up to 24 months of over time, so check your on time to help protect
a customer’s credit repayment credit report information your credit score. Paying
history, borrowers need to regularly. As new positive bills significantly late to the
look after their future credit data elements are factored point where debt collection
score by diligently making into credit reports, it’s a good agencies are engaged can
mortgage, loan and credit idea to regularly check the negatively impact your
card repayments on time. information on your credit credit rating.
file to make sure you know if,
and when your credit score
changes and can ensure the
information is correct.
7Find out about your
credit score
Being aware of what your credit score is, and how
your financial decisions impact your credit report,
is important for all Australians to understand.
It helps you to work towards addressing any issues before
applying for a new credit card, loan or mortgage.
But surprisingly, the majority of Australians Experian
surveyed have never checked their credit score.
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.com.au that can help monitor their
Experian credit score and credit file information.
Awareness across Again, despite However, when
Australia continues to improvements, asked what
improve, but 65% of people misconceptions remain worsens a
have still never checked rife about what financial credit score:
their credit score activities people think
(an improvement from improve their credit score:
71% in 2017).
22% don’t know how to 87% incorrectly
believe 76% correctly
identified “not
check their credit score paying their utility paying a bill for so long
(an improvement from bills on time improves that a debt recovery
32% in 2017) their score agent contacts you”
(slightly worse from (an improvement from
17% don’t know what a 2017 at 86%) 70% in 2017)
credit score is
(an improvement from incorrectly believe
22% 67% correctly
identified
24% in 2017) having high value defaulting on a loan
assets improves (an improvement from
13% haven’t got around
their score 58% in 2017)
to it yet
(an improvement from
(no change from 2017)
26% in 2017) 48% correctly
identified
making a high number
17% incorrectly
believe of credit applications
getting a pay rise in a year
improves their score (an improvement from
(an improvement from 40% in 2017)
19% in 2017)
8Negative New positive credit
reporting system reporting system
WHAT COULD IMPACT YOUR CREDIT SCORE* WHAT COULD IMPACT YOUR CREDIT SCORE*
Paying a default The same matters as under negative
Increase score reporting, plus:
Negative data expires and is removed Adding a new credit account
from your credit report over time Increase or decrease score
Increase score
History of making credit
Multiple credit applications repayments on time
in a short space of time Increase score
Decrease score
Bringing accounts back up to date
Default (impacts report for 5 years) Increase score
Decrease score
Having too many open credit accounts
Court judgements Decrease score
Decrease score
Having too much unsecured credit
Bankruptcy actions (eg credit cards)
Decrease score Decrease score
Not paying a bill that goes to a debt Having too high a combined limit
recovery agency on credit accounts
Decrease score Decrease score
Short term credit (eg. Pay day lenders)
Decrease score
WHAT DOESN’T IMPACT YOUR CREDIT SCORE*
A late utility or phone bill repayment Getting married
(unless you default)
Getting a copy of your credit report
Getting a pay rise from a bureau
Having high value assets Having a lot of money in the bank
Changing jobs Having (or not having) dependents
* A score may go up or down because of new information, but not always. For instance, if you already have a very low credit
score, a new default may not lower your score any further. Similarly a default will stay on your credit report for five years even
once you pay it off, and should there be other defaults on your file, your score may not necessarily increase. Likewise, if you
already have a very high credit score, continuing to make your payments on time may not make your score go any higher.
It’s important to note that there is no quick way to fix a credit score - repairing bad credit takes time.
9About Experian
Experian is the world’s leading global information services
company. During life’s big moments – from buying a home
or a car, to sending a child to college, to growing a business
by connecting with new customers – we empower consumers
and our clients to manage their data with confidence.
We help individuals to take financial control and access financial
services, businesses to make smarter decisions and thrive,
lenders to lend more responsibly, and organisations to prevent
identity fraud and crime.
We have 16,500 people operating across 39 countries
and every day we’re investing in new technologies, talented
people and innovation to help all our clients maximise every
opportunity. We are listed on the London Stock Exchange (EXPN)
and are a constituent of the FTSE 100 Index.
Learn more at experianplc.com or visit our global content
hub at our experianplc.com/blogs/news for the latest news
and insights from the Group.
Legal Disclaimer
The information contained in this report is for general guidance on matters of interest only and has been prepared
without taking account of the objectives, financial situation or needs of any particular individual. For this reason,
any individual should consider the appropriateness of the information, having regard to their objectives, financial
situation and needs and, if necessary, seek appropriate professional advice. The changing nature of laws, regulations
and rules, and of economic trends and the variables impacting them across different geographies, may mean it
contains some omissions or inaccuracies. The information given is provided “as is”, and without warranty of any
kind, express or implied, including, but not limited to warranty of fitness for a particular purpose. It is not intended
to represent legal, credit risk, economic or other professional advice. In no event will Experian or its related
partnerships or corporations, or its partners, agents or employees be liable to you or anyone else for any decision
made or action taken in reliance on the information in this report or for any consequential, special or similar damages.
About the research: Survey conducted via Pure Profile in April 2018 using an online survey method.
Survey completed by 1,011 Australians representative of the nation as a whole aged 18 and over.
(C) Experian 2018. All rights reserved. Experian and the Experian marks used herein are trademarks or registered
trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the
trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified or distributed
in any form or manner without the prior written permission of Experian.
EXPNAUWP0001 062018
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