Its comprehensive credit reporting system will allow lenders more access to a potential borrower’s credit information – but the move to positive credit reporting could disadvantage millions through allowing late payments to be noted on Australian credit files.
This new aspect to credit reporting virtually ensures there is no room for error with consumers or creditors when it comes to loan repayments or people may face a bad credit rating.
The Government proposes to bring in ‘repayment performance history’ to credit files – which among other things will allow for credit providers bound by the National Consumer Credit Protection Act to make late payment entries on a person’s credit file if payments are late even as little as one day.
In these harsh economic times, the ‘noting’ of late payments on a person’s credit file will most definitely impact on the consumer’s ability to obtain finance.
Lenders are sure to see late payments as a potential credit risk. If the late payment of a few days is due to delays in bank processing of transfers or direct debits, paying at Australia Post, BPay etc. – these things are beyond the control of the average consumer yet that is exactly who will get hurt.
Under current credit reporting legislation, late payments are not noted on a person’s credit file until they pass to the ‘default’ stage – which is more than 60 days in arrears. The creditor is also bound to fulfil a series of requirements to give the consumer the opportunity to rectify the situation before listing the default. This legislation will remain, but the ‘repayment performance history’ will also be added. The potential for error in this instance is high.
There are more than 14 million credit files in Australia (14.7 million files are held by credit reporting agency, Veda Advantage alone), and approximately 3.47 million negative listings (Veda Advantage, 2009), but the number of possible errors which exist is not certain.
The possible volume of credit files with errors was revealed by a small scale study conducted in 2004 by the Australian Consumer Association (now Choice Magazine), revealing about 30% of credit files were likely to contain errors.
“In our view, there are serious, systematic flaws which are leaving an increasing number of Australian consumers vulnerable to defamation, mis-matching and harassment,” the ACA report said.
Transferring those figures from the Choice study to the number of credit files in Australia today, could mean potentially 4 million errors currently exist on credit files in Australia.
Recently Channel 7’s Today Tonight interviewed Veda Advantage’s Head of External Relations, Chris Gration on the possible number of errors on credit reports. He admitted errors within their system alone amounted to 1%.
“We give out about 250,000 credit reports to consumers every year. But only in 1 per cent of cases is there a material error on the file, so a default or an enquiry that’s incorrect,” Mr Gration told Today Tonight.
Even if as little as 1 per cent of those 14 million credit files contained errors, that would still currently leave 140,000 credit files in Australia containing errors that just shouldn’t be there.
Under current credit reporting legislation, it is up to the consumer to check for errors. Credit file holders are able to obtain a copy of their credit report from one or more of Australia’s credit reporting agencies for free every 12 months.
But the problem is, consumers are often not aware across the board of their responsibility to check the accuracy of their own credit file, so many errors go undetected.
Often it is not until people apply for a home loan that they learn they have a bad credit rating, but by then it is too late and they are generally refused credit or forced to take on non-conforming loans at sky-high interest rates to secure the home.
When disputing any adverse listing, it is up to the credit file holder to provide reason as to why the creditor has not complied with legislation. Unfortunately many people find this process difficult – negotiating with creditors is not always easy for the individual to undertake.
The job of credit repairers is to check the process of listing defaults for legislative and or compliance errors, any such errors could deem the credit file default listing unlawful, at which time the creditor is advised to remove the default.
Given the difficult process of default removal, it is worrying for consumers that getting ‘late payment’ errors removed from credit files may be just as problematic.
If people want to obtain more information on removing errors from credit files, they can contact MyCRA Credit Repairs tollfree on 1300 667 218 or visit the main website www.mycra.com.au.