Relevant information for the media about credit reporting and credit repair in Australia.
A credit file
- How individuals obtain a copy of their credit file
- Bad credit in Australia – Defaults
- Repayment history information
- Impact of a bad credit rating
- A question of accuracy
- Credit rating errors
- The process of dispute
- The role of the credit repairer
- How professional credit repair has evolved
1. A credit file.
A credit file or credit rating is a file on an individual’s credit history and is collated by the major credit reporting agencies on every credit-active individual. This credit rating is then checked by financial institutions (or Credit Providers) and is used to assess both the amount the individual is able to borrow and their ability to repay the loan. Credit files contain a detailed list of every time the person has applied for credit, it contains, when, how much, who applied, with which company and what for.
Anyone who has borrowed money, or has established an account for services is credit active and will have a credit file in their name. This includes mobile phone plans, accounts with utility companies, rates accounts and of course loans and credit cards of any kind.
2. How individuals obtain a copy of their credit file.
Veda Advantage is the primary Credit Reporting Agency in Australia (holding approximately 16.5 million credit files ), as well as Dun & Bradstreet, Tasmanian Collection Services (if in Tasmania) and new entrant Experian.
Individuals are entitled to a free copy of their credit file annually. They can and should make a request with each agency for their credit report – as there might be different information listed with different agencies. This copy is sent within 10 working days.
If the matter is urgent, individuals can pay for a copy to be forwarded in 24 hours.
We recommend that individuals routinely obtain a copy of their credit file at least once per year, to ensure it is accurate. For more information on obtaining a free credit rating, click here.
Bad credit in Australia.
A payment default is an account of $150 or more that is 60 days or more overdue. The creditor must make the individual aware of the overdue account by sending them a written notice.
Defaults remain on the individual’s credit file for 5 years.
An overdue account can be listed as a ‘clearout’ if the creditor has made attempts to contact the individual unsuccessfully. If the individual can’t be contacted, the credit provider can immediately list the debt on their file as overdue, even if is under 60 days in arrears.
Clearouts remain on the individual’s credit file for 7 years.
5. Repayment history information
Since December 2012, information on whether an account with a licenced Credit Provider has been paid late can be collected by credit reporting agencies. From March 2014 – this information will be published and available on Australian credit reports. It is understood a new Credit Reporting Code of Conduct will allow 5 days grace for late payments before a notation is added.
Repayment history information stays on the credit file for 2 years.
6. Impact of a bad credit rating
All adverse listings may impact an individual’s ability to obtain mainstream credit and could lower any credit score calculated on the individual.
In this current economic climate even too many credit applications are often considered to be ‘black marks’ on the individual’s credit file in addition to defaults, clearouts, Court Writs, and Judgments.
The impact of late payment notations on the credit score or on assessment of credit suitability is still unknown since the information is not yet available to lenders. Speculation has been centred around just how many late payment notations will be too many to mean (a) credit is refused or (b) a higher interest rate is offered.
Most times the loan options available to bad credit clients are at significantly higher interest rates in order to cover the risks associated with taking on someone with bad credit.
7. A question of accuracy
To date, there are no official statistics provided to the Australian public on the number of defaults or other credit listings on Australian credit files.
Likewise, there are currently no statistics on the numbers of disputed credit listings, or on listings which have been removed or altered on Australian credit files.
We are hoping this will change with the implementation of the Credit Reporting Code of Conduct in March 2014, as there will be more focus on transparency for Australia’s credit reporting bodies.
The current conditions in credit reporting arguably make it difficult to obtain any scope on the prevalence of bad credit and on the prevalence of credit reporting inconsistencies.
We argue lack of information on the number of disputes makes it difficult for consumers to have any scope for the likelihood they may succumb to credit reporting errors, and may make them less likely to routinely check their credit file for inconsistencies.
In 2012 a Veda Advantage (Now Equifax) spokesperson commented on the possible number of errors on credit reports within Veda. He admitted errors within their system alone amounted to 1%.
“We give out about 250,000 credit reports to consumers every year. But only in 1 per cent of cases is there a material error on the file, so a default or an enquiry that’s incorrect,” Head of External Relations, Chris Gration told Today Tonight.
The possible volume of errors on Australian credit files was exposed by a small scale study conducted in 2004 by the Australian Consumer Association (now Choice Magazine).
It revealed 34% of the credit files surveyed contained errors.
“In our view, there are serious, systematic flaws which are leaving an increasing number of Australian consumers vulnerable to defamation, mis-matching and harassment,” the ACA report said.
Transferring those figures from the Choice study to the number of credit files in Australia today, could balloon the figures to almost 5 million errors, inconsistencies or flaws. But unfortunately, these figures are only estimates – due to the lack of real statistics.
8. Credit rating errors.
Any credit listings which the individuals believe are inconsistent, unfair, or incorrect should be disputed. Credit rating errors could be anything from the credit listing placed by the Credit Provider on the wrong credit file; to the basis of the credit listing being unfounded; to incorrect notices being provided to the individual; right through to system errors and incorrect spelling, to name a few examples.
9. The process of dispute.
Individuals can attempt to deal with Credit Providers themselves to dispute their inconsistent credit listing.
The process of a dispute is arguably not always an easy process for individuals to undertake, particularly if they are time poor, or do not have the necessary skills to formulate a case or get to know the relevant legislation when making their complaint.
Some individuals have in the past made a verbal dispute with their Credit Provider about what they consider an inconsistent listing on their credit file, and have been told the listing cannot be removed, but can be market as paid if it has been paid. This can deter individuals from pursuing their case of dispute.
Put simply, a Credit Provider should remove a credit listing if it has been demonstrated that the listing was placed unlawfully on the credit file. It is in the demonstration that many individuals fall short.
If the Credit Provider refuses to remove the credit listing, the individual may take their case to the relevant industry Ombudsman. This can be helpful in many cases, but in some cases, it may not be in the best interests of the individual to pursue this course.
The Ombudsman must act impartially, and cannot advocate for the individual. Some avenues of dispute may not be open to the Ombudsman, or they may choose not to investigate certain areas of dispute.
10. The role of the credit reporting lawyer.
The role of the credit repairer is to advocate for the individual in matters of credit reporting accuracy.
Creditors are bound by a large volume of legislation and codes of conduct to do with placing information on consumer credit files. These laws are in place to protect consumers from unfair and damaging credit reporting.
Credit repair is a lengthy process, involving the review of all documentation from an individual – including the credit file and all the circumstances surrounding the default, writ, or Judgment.
The credit reporting lawyer will conduct an audit-like investigation of the circumstances surrounding the credit listing, noting any compliance issues which would deem the credit listing unlawful and require its removal from the credit file.
If the credit listing has been placed unlawfully, then it should be removed. Therefore, the credit reporting lawyer’s role in the credit reporting landscape is to uphold credit reporting accuracy on behalf of those individuals.
The process of credit repair often involves lengthy written requests and submissions of documentation and supporting evidence to establish a case for removal.
It is worth noting, that some in the ‘credit repair’ industry may claim to give quasi-legal or legal advice without adhering to the restrictions of the law.
A credit reporting lawyer can act in court processes; identify legal issues; provide legal advice; prepare binding agreements; conduct formal negotiations and follow through with enforcement where necessary. A credit reporting lawyer can also make formal recommendations to Credit Providers making reference to the law, and make representations on behalf of clients.
11. How professional credit repair has evolved.
The Credit Repair Industry in Australia has grown significantly over a short period of a couple of years. There are many reasons for this. One is due to the tightening of bank lending criteria following the Global Financial Crisis (GFC).The decline in sub-prime lenders since the GFC has meant that many non-conforming loans that were previously available to many people have since folded.
Credit repair has grown from the need for potentially millions of credit file holders with black marks on their credit report to find some way to buy a home, a car, get a credit card and even a mobile phone plan.
Because of tight lending criteria, the need for greater accuracy in credit reporting has arisen.
When deciding whether to lend someone money, banks are looking at any reason people may default on a potential loan – which includes any suspect credit history.
The mistakes creditors make every day in reporting negative listings may have previously gone unnoticed, but since the GFC, they can be the very reason many people are refused credit.
So with many instances of credit reporting ‘inconsistencies’, coupled with very little consumer knowledge on credit reporting law and a great need for a third-party advocate when dealing with creditors, the credit repair industry has been driven forward.
The lack of formal regulation has prompted some in the credit repair industry, like MyCRA Lawyers, to seek significant regulation under the overarching framework of being an Incorporated Legal Practice. This is pushing the industry to do more for consumers and provide a better advocate within the current regulations.
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