How does comprehensive credit reporting work?

Credit reporting is the process whereby lenders provide credit bureaus information about their borrowers, which is then used by the bureaus and listed on a borrower’s credit report. These reports can be used by lending institutions to help assess the creditworthiness of potential borrowers when considering deciding whether or not to approve a loan application.

Traditionally, credit reporting focused on checking whether or not an individual was associated with any negative data: for example, had they ever defaulted on a loan or failed to make payments on time? An accumulation of negative data could reduce an individual’s credit score, making it harder for them to apply for a loan. However, there was no reward for individuals with a strong credit history: credit bureaus could deduct points for poor behaviour, but never awarded them to borrowers who demonstrated responsibility and trustworthiness.

Comprehensive Credit Reporting (CCR) aims to change this by ensuring that a richer supply of data is available to customers and lenders. It requires credit providers to record not only negative data (such as loan defaults, credit inquiries, and loan infringements), but also positive data (such as punctual repayment histories, credit limits, and the dates when credit accounts are opened and closed). This will result in more nuanced credit reports that offer a clear picture of borrower behaviour.

It became mandatory for each of the big four banks to provide 50 percent of their credit data to credit reporting bureaus by July 2018, with 100 percent of their credit data expected by July 2019. Smaller banks will be required to participate at a one-year delay.