Credit Scores and Repayment History Friend or Foe?

Repayment History reporting, sometimes called Payment History, or Credit History, or even Credit Rating is the collection and reporting of something you may until now thought of as deeply personal. But it is no longer only your business. This reporting of just how you manage your credit repayments good or bad, is now easily accessible by all your credit providers to see, your current providers and any future providers you may seek to deal with.

This means that if your credit card providers, your banks, even mortgages brokers can see exactly how well you have been making your payments and repayments on your home loan, your credit card, your personal loan, car loan, even that TV purchase on 60 months’ interest free. They know: do you make them by the due date, or are you regularly late to pay?   Do you pay the full outstanding balance each month, or simply the minimum payment requests? Have you been charged late or penalty fees or loaded with a slightly higher interest rate because of your delinquent payments?

Yes, that information is now all collected about you by the major credit reporting bureaus such as Equifax, Creditor Watch, Illion, and Experian etc. Repayment History is simply a log of how well you have kept payments up on agreement.

The most misleading thing about your credit score, is that you can have three different scores from three different credit agencies. There are also third party websites offering for you to enter in your personal information to obtain your 'free' credit score. We are all smarter these days, and realise that nothing is really 'free'. What you are doing by imputing your personal information to obtain these scores is essentially signing up for these websites to 'sell' your personal information for marketing purposes! Read the fine print and you'll find this.

Now does that have you waking in the middle of the night in fright? It should. But what is even more scary is that over and over again, these agencies just plainly get it wrong, and that means you suffer with a bad, undeserved credit rating which dries up your ability to get a loan or lift the credit available on your bank credit card.

Since 2014 the Federal Government has been trying to get our banks to “positively report”, that means also tell the credit rating bureaus your good repayment history.  Since July 2019 this positive reporting has been mandatory.  But the big four banks are still resisting. And again, it can be you who suffer.

After 12 March 2014, repayment history was legislated to be added to Australian. Technically Comprehensive credit reporting has been legislated in 2014, but with the Big Four largely refusing to take part, the former Treasurer at the time Scott Morrison was forced to step in to make Comprehensive credit reporting mandatory from July 1, 2018. The roll out was has occurred over the last two years sharing 50% of random repayment information by July 2018 and the remaining 50% mandatory by July 2019. This is why the lending market is feeling it right now as the scores reveal more detail about the payment behaviour of consumers and businesses alike.  

Repayment history information is whether the minimum repayment on a credit account, like a credit card, personal loan or mortgage has been made on time(or within a 14 day grace period) and if not, how late the payment was made, for a particular month. Only licensed credit providers can share and receive your repayment history information and a 14 day grace period is given. This doesn’t include telco and utility companies, not only is it the major banks who can report, are now all on board and other lenders such as Latitude Finance are now also on board.  But Telcos and Utilities companies cannot. Be aware, your Repayment history information is recorded monthly and can be held on your credit report for 2 years.

Now It’s about time Australian credit reporting matches that used for has come up to speed, as we were decades behind the US and the UK, and probably because those international reporting bureaus now own our main reporting companies, such as Veda Advantage being bought by US bemomath, Equifax.- and Credit Reports containing Repayment History are one of the best ways of ensuring that credit is always extended responsibly - and that credit is always given where credit it is due, and not where it is not. If you pay your credit card or loan repayments more than 14 days, this can be recorded on your a  for 2 years.  It is a report in detail and then in summary whether you are a poor, good or excellent credit risk.

Because we are all human, and a victim of life, almost everyone will find the odd late payment on their Credit Report, but if the payment becomes later than one month overdue, or if there are many late payments, then that will adversely affect your Credit Score and limit your ability to get credit.

The worrying thing is huge concern is this; there is simply not enough positive information on the credit file to outweigh the negative at this stage. This will have a huge adverse impact on one’s credit score.

Every person has a score from 0-1200, there are many variables between the three main credit reporting bureaus with regards to their calculated score. Contributing factors can be, address history, applications for credit, current credit facilities, repayment history, default or overdue accounts, serious credit infringement and court writs or Judgments.  

And one more big worry... they get it wrong!  The bureaus make mistakes, and you suffer.  Did you know that being a director of a number of companies, ie; being entrepreneurial, or even just tax savvy, can affect your score negatively? The largest bureau Equifax is fast to penalise you for this.

Or that a court writ taken out against you can, within days, be shown as a major negative on your credit score!!!  We know of instances where this has happened before the person even knew they were being sued.  Even if the case is withdrawn, some agencies leaving that black mark on your file.   How can that be?

The big secret kept close to the chest of the credit reporting bureaus is their algorithms. Although some information is published about the origin of the score algorithms, it’s still a grey area with the bureaus as they adjust to the new systems and requirements.  They are determined by data calculated on all credit reports past and present. 

The main issue that concerns Alicia Candido from We Fix Credit is the publishing of the likelihood to be a ‘high risk’ an example would if a person have multiple directorships, it seems that Equifax is giving them a ‘high risk’ percentage based on that. It suggests that being entrepreneurial in Australia doesn’t pay off in the view of the American corporate giant, publicly listed company listed on the New York stock exchange (NYSE) EFX who’s revenue is recorded at 3.508 billion $US in 2019. 

With the extreme hardship cases we are seeing with the Covid-19 crisis, it is a huge concern that late repayment information will be recorded to the detriment of consumers and small business owners which could financially cripple them if potential credit providers use this information in the future to determine their credit worthiness. This information is not to be recorded during hardship, however there are situations that will slip through the gaps and be published on the credit report. The best way to avoid this is to keep in contact with the banks and let them know what the situation is and make a record of the call.

“What we do know, is the repayment history information makes up at least 30% of the impact of the credit score. This is why it’s ever so important that your repayments are made on time. Whilst there are is provisions for information not to be recorded during financial hardship, some lenders are not correctly following these procedures leading to inaccurate credit information and damaging low credit scores.  And just try to get through to someone at these bureaus to explain their mistake!!  This is where consumers may require the assistance of a credit repair company to rectify inaccurate information so that their score reflects their true position”  says Alicia Candido from We Fix Credit.

For more information or comment:

Alicia Candido
https://wefixcredit.com.au/1300 003 665