Research from consumer education website, CreditSmart, has found that many of us hold misconceptions about what goes into our credit report, and what credit providers look for when checking a credit report.
The CreditSmart website is owned by the Australian Retail Credit Association (ARCA), which is the peak body for organisations involved in the disclosure, exchange and application of credit reporting data in Australia. ARCA’s members are the most significant credit providers including the four major banks, credit reporting bodies (CRBs), specialist consumer finance companies, and marketplace lenders. A list of companies that support the CreditSmart education campaign is listed below.
They say that almost nine in ten Australians (88%) understand that banks and lenders check their credit report when they apply for a loan or credit.
Mike Laing, CEO and Chairman of ARCA, which founded CreditSmart, said that, unfortunately, too many people in Australia misunderstand their credit report and the information it contains.
“Accessing credit is part of everyday life and yet alarmingly, most consumers are unaware of the information included in their credit report. Your credit report will influence whether your application for credit or a loan is approved as your credit report forms part of a credit provider’s assessment of your application for credit or a loan,” said Mr Laing.
The research, undertaken by YouGov Galaxy, was done ahead of the upcoming changes to the credit reporting system. Known as comprehensive credit reporting (CCR), from July 2018, the four major banks will be required to share 50% of customers’ data with lenders, to ensure a complete picture.
What does my credit report include?
A huge 63% of Aussies believe how much money they make is included in their credit report. Further, 40% think the balance on their savings account is also on their credit report.
“Your income and bank balance isn’t included in your credit report. When you apply for credit or a loan, the lender will ask you about your income, expenses and your financial assets, as all of this is taken into consideration, but it will not come from your credit report.
“You could have a lot of savings in the bank, but a bad credit report because you were careless about paying your financial accounts on time”, said Mr Laing.
Separately, more than half of Australians believe that gender and marital status are included in their credit report, and one-third think that their place of birth and car insurance claims are also shown. All of these are incorrect.
A further 63% of consumers thought their credit report already shows whether or not they make their monthly credit card and loan payments on time. This is a change that is only starting to happen now as part of CCR.
According to CreditSmart, a credit report is made up of:
- Identifying information (e.g. name, address, date of birth, employment and driver’s licence number)
- Information about the credit accounts you have and, for credit cards, personal loans, mortgages or car loans, your repayment history on these accounts over the last two years
- Credit applications over the last five years
- Default information (if any) over the last five years (payments at least 60 days overdue)
- Personal insolvency information and serious credit infringements (if any) for up to seven years
Who can access my credit report?
While most of us know that a bank or lender will look at our credit report when we apply for a loan, many are unaware that our credit report can be checked when we apply to open a new gas or electricity account (46%) or contract a mobile phone (46%).
“Most credit providers, which can include gas, electricity and phone providers, will carry out a credit check to find out how you’ve handled your debts in the past – something to keep in mind,” said Mr Laing.
Your credit report can’t be accessed when you apply for a job or take out or make a claim on insurance, which is not well known by Australians.
According to CreditSmart, your credit report will likely be requested from a credit reporting body by a credit provider when you:
- Apply for a loan from a bank (or any other finance provider)
- Apply for a store card (e.g. when you buy a TV on interest free finance)
- Rent items like a TV, fridge or computer, but not home rental
- Apply for a car loan
- Buy a mobile phone on a post-paid mobile plan
- Sign up for a phone, gas or electricity account
Checking your credit report frequently
Mr Laing stresses the importance of checking your credit report annually.
“A popular misconception is that checking your credit report can negatively impact your credit score, but that is not true. As a security measure your credit report will show who has looked at your credit report, including you, but this is done to protect your privacy and is not shown to a credit provider when you apply for a loan.
“Every consumer should check their credit report annually. Monitoring your credit health regularly – like your physical health – lets you confirm you’re managing your credit well and are able to access credit when you need to,” concluded Mr Laing.
For more information on how to get your free credit reports, and to understand what is on them or fix any errors, consumers should go to http://www.creditsmart.org.au website, set up by credit experts to provide clear information on the credit reporting system to assist consumers to optimise their credit health.
Companies that support the CreditSmart education campaign include:
| ANZ Bankwest Bendigo and Adelaide Bank/ Delphi Bank BOQ Citi Commonwealth Bank Compuscan Credit Savvy Credit Simple CUA Customs Bank Experian |
Firefighters Mutual Bank/Teachers Mutual Bank Genworth GetCreditScore Good Shepherd Microfinance HSBC Keypoint Law Macquarie ME Bank MoneyMe MoneyPlace NAB Now Finance |
Pepper Money Police Bank QBE SocietyOne Suncorp Toyota Finance/Hino Financial Services/Lexus Financial Services/Power Torque Financial Services Unibank Westpac/ Bank of Melbourne/ BankSA/ StGeorge/ RAMS |