The Australia Credit Bureaus are keen to see many more Comprehensive Credit Reporting (CCR) clients coming on board in 2019. The Big four banks were mandated to participate in CCR by July last year so there are now millions of CCR records available on individual client Credit Reports currently in the Credit Bureaus. There are also a good number of Tier 2 and 3 credit providers that are also submitting CCR data to Bureaus and this increases the likelihood that a Credit Enquiry undertaken on a client will have a number of CCR data records on the report.
With having access to CCR data on a Credit Report, a finance company has far greater visibility into a client’s finances and their payment history. This significantly changes the view they have of a client and will no doubt lead to better lending decisions and better long term health of their ledger. The ability to see how a potential client is performing on their existing loans, and in some cases utility bills, provides far greater insight and depth of understanding than historic negative data will ever give.
The use of the Number of Enquiries data has become a popular measure for assessing a client based on the Credit Report – but does it really give any clear indicators of a client’s ability to repay a loan? Part of its popularity is due to the fact that it is one of the only current information sources on a credit report and it unfairly penalises an applicant that might have shopped around for a mortgage or a car loan. Surely a better option is to look at how that same client has been repaying their current loans to assess their ability to repay further loans.
With the Banking Commission report it is clear that there will be a far greater emphasis on accurately assessing a client’s financial position and ability to repay a loan going forward. One of the criteria in assessing a loan to ensure it is “not unsuitable” for a client, is their ability to repay it and a clear indicator of that metric is their repayment performance over existing and past loans that is available when CCR data is included in a Credit Enquiry. To ensure you are meeting your Responsible Lending Obligations (RLO), CCR is a key tool you can use to ensure you are meeting this.
For you to receive CCR data on a Credit Enquiry, you first must supply your own CCR data to the Credit Bureau – Reciprocity as it is referred to. To receive, first you must give. This is where finPOWER Connect can assist you. finPOWER Connect now has, as part of the Credit Reporting Module, all the data formats required for a finance company to submit CCR information to all Credit Bureaus in Australia. Once you has been through the testing and signoff phase of CCR with a Credit Bureau, the monthly extract of CCR is very simple and efficient, and a small price to pay for being able to prove your commitment to meeting your RLO for clients.