Ah, to be young. Think back to when you were just beginning to understand the world, and earned your first dollar in pocket money allowance. You didn’t consider the daunting world of finance ahead of you, did you? You probably imagined purchasing an ice cream and tasting the delight of the soft cream hitting your mouth. Borrowing money or keeping a check on your credit score? Nah!
Slowly but surely the comforts of childhood peel away and we are left to face the brutal world of finance hurtling towards us.
Come time to take out our first loan, we see the industry wrapped in negativity. Especially, with credit scores and credit reporting. Your credit score reflects your standing amongst lenders and, until recently, has only punished people for poor choices.
Have no fear! Positive credit reporting is coming to Oz for all to enjoy. At its core, positive crediting reporting allows people who have made poor financial decisions, to re-establish themselves as trusted borrowers. Before diving into positive credit reporting. Let’s take a look at the history of credit reporting.
Firstly, what is credit reporting?
A credit report is a statement that highlights your borrowing history. Lenders use these reports to determine whether you are a trustworthy borrower. They also look at the likelihood of you repaying your loan.
A credit report contains the following information:
- Your personal details
- Any bankruptcy or court judgements
- Credit applications that you lodged in the last five years
- Credit providers you currently with credit with
- Late or missed payments
- Defaults on loans, or credit card payments
- Number of credit inquiries
As a member of the financial community, it’s important to keep a check on your credit score by ordering a free credit report. To request a free copy of your credit report, visit Equifax for more information. Simply, ordering of copy of your credit report will not impact your credit score (contrary to popular belief). When you’re thinking about applying for a quick loan, or credit card, that’s the optimal time to check your credit report. It’s essential to be aware of your financial standing before applying for more credit.
What is negative credit reporting
Negative credit reporting has been the staple for credit reporting throughout its history. It’s the practice of lenders basing their assessments of a potential borrower solely on the negatives blemishes on their credit report. However, with positive credit reporting, that negative credit reporting is taking a backseat.
History of credit reporting
Credit reporting in the modern sense is an American concept. Historically, it’s legacy has paved the way for Americans and other capitalist systems to realise the “American Dream” through access to credit. Credit reports cement our standing as a member of the global financial community. They dictate how much insurance we pay, how much interest we are charged and, sometimes, where we live and work. Having a healthy credit score is more important than ever. Let’s dive into how the system rose to this height of importance.
In its infancy, credit reporting was simply a word of mouth system. In the 18th century if you wanted to secure a loan you would simply ask for the reference of a well-trusted neighbour. Mercantile Agency was the first crediting agency. Lewis Tappan founded the agency in 1841.
He ran his business by scouting information from across the country, gaining insights through correspondents. The reports were biased to class and race, mainly catering to the wealthy, elevating their standing. Ah, so that’s where the classic aphorism comes from – the rich get richer and the poor get poorer.
In the aftermath of the Civil War, the three pillars of credit reporting were in place: mass surveillance, information-sharing was made widely available as a rating system.
It was only in the 50s that technology was integrated with the credit reporting process. FICO was founded and an algorithm was formed to calculate credit scores. The process remains similar to this day. Before the push for positive credit reporting, the algorithm only punished poor financial decisions. Therefore, making it difficult to crawl back from bad credit.
What is positive credit reporting?
Now, you might be thinking it’s all doom and gloom for your credit score. Have no fear! Australia recently introduced positive credit reporting.
Known as comprehensive credit reporting, positive credit reporting is being rolled out across Australia. It allows lenders to make a more balanced assessment of a borrower’s credit history. With the new additions to credit reporting, lenders receive a more positive outlook on your credit history.
The new additions to your credit report:
- Information about current accounts you hold
- Closed and open accounts
- The date you paid any default notices
- How well you have repaid recent repayments
Other major countries have already implemented positive credit reporting. Improving borrowers leverage when they are hunting for cash loans. Positive credit reporting changes the negative dialogue that has shrouded credit lending and can help borrowers have access to much-needed credit.
In short, rather than just showing the bad things you do, positive credit reporting will show the good, too.
How does positive credit reporting affect your credit score?
Positive credit reporting is like Christmas. Its arrival has landed a number of goodies at your doorstep. Let’s unwrap them!
Most Australian borrowers aren’t sure how positive credit reporting will affect their ability to borrow credit. So, get informed about positive credit! It’s dramatically changing the way we lend and borrow money.
The benefits of credit reporting for the borrower and their credit score:
Easier to recover from a bad credit score:
By recording recent positive behaviour, acts like making repayments on time will balance out other negative spots on your credit report. Missed or late payments remain on your credit score for at least 5 years. As a result, your lending ability could be negatively damaged by your financial circumstances 5 years ago. With positive credit reporting, lenders can assess your current financial circumstances when looking at your application.
No more “thin” credit files:
When it comes to assessing your credit history, lenders tend to look for a long history of credit. They want to see that you have an established line of credit. The additions of positive credit reporting will lengthen your credit report. A borrower armed with a positive credit report increases the likelihood of a lender accepting their loan.
Soften the blow of one negative event
In the world of negative credit reporting, one poor financial decision or an unavoidable default would significantly impact your credit score. Now to the world of positive credit reporting. A place where the sun shines and only a pattern of missed repayments will significantly impact your credit score.
Striving for accuracy
Positive credit reporting is a swing in the right direction for accurate credit reporting. The method presents the best possible version of your credit score to the lender. Positive credit reporting reduces the risk of high-interest fees and rejections if you have previously had bad credit. The need for no credit check loans is disappearing, as all your credit history should look shiny and new!
Positive Credit Reporting: the power to the borrowers
With negative credit reporting, the system had all the power. Traditionally, the negative aspects of your credit history would outshine the positive ones. Positive credit reporting reinstates the power to the borrower. This may be a foreign concept to you, so let’s explain.
If your credit score is bad, your options are limited when it comes to lenders. And you’re more likely to be slapped with a higher interest rate. If positive credit reporting re-adjusts your report and presents a more accurate finding than you can shop the loan market with your good credit score. Without comprehensive credit reporting, borrowers would always be at a disadvantage. With the power balance between the lender and borrower would be weighted to the lender.
Why we love positive credit reporting
It’s no secret that Nifty Loans wants to give every Australian a chance to apply for credit when they need it. We know that life can deal you a hand you haven’t prepared for leaving you stuck. Our loan philosophy is built around the idea that one bad round of life, shouldn’t affect your ability to borrow money. We believe in cultivating a positive small loans experience for our borrowers.
Giving access to people who are seeking loans is what we do best. Nifty Loans adheres to responsible practices. We don’t accept an applicant if they cannot afford to repay their loan. We have 100% adopted the positive credit reporting philosophy into our loan assessments. Past finance may not be an accurate representation of your current situation. We love that the rest of Australia is embracing this credit philosophy.
How to keep track of your credit score
Comprehensive credit reporting has certainly increased the accuracy of our credit reports. The added additions to our credit reports introduce new ways to improve a bad credit score. So, get driving on the road to a good credit score with the help of positive credit reporting.
How to improve your credit score and keep it healthy:
Stick to your repayment schedule:
if you have a notorious habit of forgetting important dates, then opt for direct debit. An automatic payment system is a great way to easily maintain a good credit score. Set goals for yourself, and celebrate the day you become debt free again! To make sure your repayments don’t overwhelm your bank account work them into your budget.
Keep track of your credit score:
Information is power, so it’s important to know the status of your credit score. With a free copy of your credit report, you can also track the progress of your credit score. And how it reacts to financial decisions you have made.
Keep your credit card balances low:
Manage your credit card debt. Did credit card debt land you in a bad credit score to begin with? Then perhaps stay clear of credit cards whilst you’re trying to rebuild your score. If you borrow money from your credit card, why not use it as an opportunity to improve your credit score by making your repayments on time?
Don’t close old accounts:
As mentioned above, a long credit history is a good credit history. So, don’t be tempted to close old accounts or credit cards. This will shorten your credit history and ultimately damage your score.
Selectively choose new credit inquiries:
Whilst you’re trying to rebuild and maintain your credit score, go easy on loan inquiries. Don’t apply to several companies just to increase the likelihood of being accepted. Even with positive credit reporting in play, it will still significantly damage your credit score.
So, cheers to a positive credit reporting and maintaining a healthy, good lookin’ credit score.
Let’s be friends
It’s exciting to see Australia embracing a positive outlook on credit reporting. Borrowing money and knocking your brain into overdrive thinking about credit reports can result in stress and anxiety. So, don’t forget to return to that bright-eyed kid every so often and go out and buy yourself an ice cream with a few spare coins.
Love learning about the tops tips for finance? Then, discover tops tips on how to change your spending habits.