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Open Banking and Comprehensive Credit Reporting are two of the latest major changes that banks have had to make in Australia. How do they affect home owners?

I thought I should let you know what’s up with these two terms because there’s actually some positives here for home owners and property investors.

So what is open banking?

Open banking is all about your information (data) which is collected from your lender when you submit a loan application or any other interaction you have with your lender. You would think that this information belongs to you and you can do whatever you like with it, but up until now this hasn’t been the case. If you were to ring your bank and say, “I’m opening an account at another bank, can you send them all my information please”, your request would in most cases be declined.

You are now in control of your data

Well, guess what? That is no longer the case. Now, you have the legal right to move your data around, making it easier to access your data and share it with other businesses. For example, moving between banks when you see a better deal will be a lot less hassle for you now.

Open banking is something all businesses will be forced to comply with but the big four banks – CBA, ANZ, NAB and Westpac – are first off the rank. This change in legislation was made to improve your control over the data which businesses hold about your use of their products and services. Of course, data about you can only be accessed by businesses once you’ve authorised it. I think open banking is a plus for all of us and seeing as the information is about us, then of course we should own it right?

So what is Comprehensive Credit Reporting?

In the past, only neutral and negative data collected on your credit report. It really only included where you went wrong and also contained information such as credit enquiries* and information from credit providers such as defaults and serious credit infringements.

*A ‘credit enquiry’ appears on your credit report each time you enquire about some form of credit. Even if you don’t proceed with a credit card or car loan, the enquiry still shows up on your credit report. Having a ‘busy’ credit report (multiple enquiries) will negatively affect your credit score so before you go online credit card shopping, only apply for credit where it’s a necessity.

A positive reporting system

With Comprehensive Credit Reporting, credit providers get a more complete picture of your credit profile. That is, all the positive aspects of your payment history are now added to your credit report. This gives a better overview of your credit history and means that lenders can make more informed lending decisions.

Under Comprehensive Credit Reporting the information in your credit file now includes:

Repayment history:

  • Repayment history for credit accounts such as credit cards, home loans and personal loans
  • Whether you have made the minimum payment required, or an additional payment
  • Whether the repayment was made on time or not

Consumer credit liability:

  • The type of credit account opened (e.g. credit card, car loan, personal loan etc)
  • The date the credit account was opened and/or closed (up until now your credit report will only show when the account was opened, and doesn’t advise when an account has been closed)
  • The name of the credit provider and whether they are a licensee
  • The current limit on the credit account

Comprehensive Credit Reporting is a voluntary opt-in system, so it will take time for all lenders to switch across. In the meantime, it is still extremely important that you stay on top of your finances. For example:

  • Consider setting up direct debits to help ensure bills are paid on time
  • Be careful about constantly switching credit card providers (to get points)
  • Notify your credit providers of your new address when you move
  • Research thoroughly before applying for credit and only apply when you really need it
  • Use an external money management company to pay all of your bills for you (I do this personally and LOVE it! I haven’t had a bill delivered to my home in over 9 months)

Let us know if you need any further clarification on Open Banking and Comprehensive Credit Reporting. We are here to help.