Do you have a credit card that you regularly let loose on? If you have trouble paying it back, you need to know that big brother may be watching YOU! Australia’s credit laws have just had a major overhaul. One of the biggest changes affecting you will be that your repayment history on accounts such as your credit card may show up on your credit file. This could impact you and your ability to obtain credit. We look at what you need to know about your repayment habits, and give you some tips so that you may be less likely to be caught out with bad credit.
By Graham Doessel, Non-Legal Director of MyCRA Lawyers.
The lowdown on the new laws…
From March 12 2014, your repayment history on licensed credit accounts (this includes your loans and also your credit cards) may show up on your credit file and remain there for 2 years.
An account of this type more than 5 days late could be recorded late by your credit provider, if they decide to take up the new credit system.
Here is some information on repayment history information, set out on the Office of the Information Commissioner’s website:
What is repayment history information (RHI)?
RHI is information about whether you have met your consumer credit payment obligations. Consumer credit is credit that is intended to be used primarily for personal, family or household purposes.
RHI includes information about whether you have made a payment on time or whether you have missed a payment. If you only pay part of the amount owing, you are taken to have missed a payment.
RHI includes the day on which a payment is due, and if you made a payment after that day, the date on which you paid. Therefore, RHI can include both positive and negative information about your credit history.
It does not include the amount of any missed payment — only the fact that you have made or missed a payment.
What types of payments could be included in my RHI?
RHI can include information about any consumer credit payments that you make, or fail to make, to a credit provider that holds an Australian Credit Licence.
This means that RHI will usually reflect made or missed payments on a loan or credit card.
When can credit providers begin collecting RHI?
RHI can only relate to payments that you have made or missed from December 2012. Then from March 2014 licenced credit providers can pass your RHI on to credit reporting bodies.
How will my RHI affect my ability to obtain credit?
From March 2014, credit reporting bodies can disclose your RHI, along with other credit-related personal information, to licenced credit providers. Those credit providers may use this information to help determine your eligibility to be provided with credit.
This means that if you fail to make the full amount of a payment on time from December 2012 it may affect your ability to obtain credit in the future.
How far back will my RHI go?
Information about any particular payment cannot be held for more than two years from the date it was due.
However, RHI will not include information about any payment that was due before December 2012.
How will I know if a credit provider will pass my RHI on to a credit reporting body?
When a credit provider collects your RHI it should notify you of certain matters, including the name and contact details of any credit reporting body to whom it is likely to disclose the information.
So whilst not every licensed credit provider will be taking comprehensive credit reporting on board, and some will take a while to apply the changes, it is really important to start implementing better credit habits NOW to ensure you’re not caught out with bad credit.
Here’s our top tips to make sure you stay on top of your credit card and avoid a late payment notation and also defaults:
1. Pay on time, every time.
It doesn’t have to be a big account to have an impact on you. Accounts for as little as $150 which go unpaid can see you defaulted and banned from mainstream credit for five years. Paying on time, every time is your first line of defence against bad credit, especially following the introduction of late payment history.
2. If you can’t pay for it – let your Credit Provider know.
If you run into money troubles – the WORST thing you can do is pretend like it’s not happening. If you lose your job, or run into temporary financial difficulty – the smart thing to do is contact your Credit Provider to work out alternative arrangements to bridge the gap. Asking for a financial hardship variation may save your credit file even if you are struggling to make payments.
3. Tie up all financial loose ends when you move or go overseas
A really common way people can find themselves in trouble with their credit file – sometimes without even knowing it – is when they move house or go overseas for extended periods. Typically an account gets sent to your previous address and remains unpaid and then listed as such on your credit file. This can occur frequently with electricity accounts. If you move around a lot, consider a P.O. Box for all your mail or an alternative address. Likewise, make sure you contact your Credit Providers to inform them of your new address when you move – or if going overseas, have someone keep an eye on your mail.
4. Check your credit statements and order a credit report.
Many people of all age groups have the mistaken view that if something wasn’t right with their credit accounts or something was listed incorrectly on their credit file – that someone would inform them. This is seldom the case. It is your responsibility to check that your accounts are running right by checking your statements when they come in. Review each phone bill. Query anything you’re not sure of.
In addition to this, you should also regularly check what is being seen by lenders by ordering a copy of your credit file. It is free once every year from Australia’s credit reporting agencies – and you should order it annually to make sure everything reads as it should.
5. You have a right to correct mistakes
Every Australian needs to know that mistakes can happen on credit reports. Likewise, bad credit can be listed on credit files unknowingly.
A credit listing that you feel is inaccurate or unfair should be tested against the appropriate legislation for its validity and its accuracy. The process of dispute is not easy, but Creditors should be called to account for any inconsistencies. You should also know Creditors have a legal obligation to remove a listing which was placed incorrectly.
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