Credit rating at risk under legal change
REMEMBER that credit card bill you put off paying for a couple of weeks last Christmas?
Well new changes to the Privacy Act that came into effect earlier this week mean any credit card bill or house or car loan payments made just five days after the due date will show on your record.
While there's still time to change your billing habits, the scheme will apply retrospectively - recording any late repayments made since December 2012.
The Australian Retail Credit Association said the reforms would provide a clearer picture of a consumer's ability to repay debts, enable better matching of consumer credit needs and give "fairer" access to credit with increased consumer protection.
Mortgage Choice Bundaberg franchise owner Ron Jeppesen said that under the changes lenders had the potential to view a person's credit repayment history on all credit accounts.
He said this would enable a credit provider to be given a good assessment of a borrower's financial position.
"As such, if you have managed to pay your bills on time, this may increase your chances of obtaining a loan as it will prove to the lender that you are a model borrower," he said.
"On the flip side, if you have been known to miss a couple of credit repayments by more than 30 days, then you may have some work to do."
But University of Queensland School of Law senior lecturer Paul O'Shea said he was concerned that the repayment data would initially lead to a credit squeeze, particularly for people on low incomes.
"This will last possibly about six months before lenders realise they are losing market share and take a more sophisticated approach to the increased and more detailed information that the new system will provide," he said.
"Now a late payment will be recorded not as a default but as a late payment."
According to independent research commissioned by the Australian Retail Credit Association, 59% of consumers have not heard of credit reporting.
"Not a lot of people are aware of their credit history," The Money Edge chief executive officer Leanne Rudd said.
"I think people need to take responsibility for it at the end of the day."
Mrs Rudd said it was unlikely lenders would be too concerned about a single missed payment.
Automate debts: If you want to make sure you meet all of your financial obligations each month, it pays to set up automatic payments.
Close it down: Shut down any credit facilities you don't need. Do you have a credit card that you don't use but you have for "just in case" emergencies? If you do, get rid of it.
Review your file: It is important to keep a close eye on your credit file. By regularly reviewing your credit report, you can keep track of what is showing up and change any information that is inaccurate. You can obtain your credit report from sites such as www.
Be diligent with expenses: If you move out of shared house accommodation, make sure your name is removed from any bills. Don't keep your name on anything it doesn't need to be on.
Source: Mortgage Choice
What does this mean for you?
A clearer picture of your financial situation
Better matching of credit to your needs
Increased consumer protection
You may not receive credit when previously you would have been approved
Late or missed payments may show up on your credit report