Credit reporting, credit segregation and credit scores are all part of Open Banking, which has been standard practise in Australia since 2020.
It has become normal for Australian consumers to provide permission to instruct their banks to send data to accredited third parties.
This allows third parties to proactively use the data to provide customised information to consumers, or other financial intermediaries who can use the data to improve their client service and experience.
The ACCC provides official Consumer Data Right (CDR) Rules to clarify how CDR data is requested and used in the banking sector.
In simple terms, Open Banking gives people the ability to share their banking information with other parties, including other banks.
The origins of it relate to a concept called "Consumer Data Rights", which has the objective of building better consumer control over the data that businesses hold about consumers' use of their products and services.
Open Banking means that you can share your data online with trusted and validated third-party providers.
Since Open Banking was implemented, Australian banks have provided processes to make data readily available on credit and debit cards, deposit and transaction accounts.
You may have heard about credit scoring in the context of your finance application. A credit score is a statistical number that, based on credit history, indicates your creditworthiness.
Your credit score in Australia typically ranges from 0 to 1,000 or 1,200. The higher the score, the more financially trustworthy a person is from a lender’s perspective.
The score is driven by many obvious factors (your previous conduct, frequency of application, etc.) , though also by other demographic factors such as age and where you live. This science has been around for a while now, but we are seeing it being applied at new levels, especially with emerging technology.
One of these is Comprehensive Credit Reporting, which has become so prevalent that some niche funders will say, as a point of difference, “we don’t credit score our loan assessments”.
Any person can request data that relates to things like eligibility criteria, terms, and interest rates, relating to a range of products, including home loans.
In these cases, data relating to a specific consumer cannot be requested or obtained. The institution will use a specialised service to disclose the product data, in machine-readable form, to the person who made the request.
As an accredited agency, a Finance Broker or Adviser can approach an institution to obtain CDR data about their customer. Data must only be used in relation to the goods or services they are providing - much like the current data extraction tools.
Measures that will assist in keeping your credit profile and credit score in good standing include:
✓ Keep your ATO tax obligations up to date
✓ Make your loan repayments on time (don’t think a missed payment or two will go unnoticed)
✓ Pay all other commitments (utilities, phone, etc.) on time
✓ Lower limits on your credit cards as banks will assess your credit card limit as a loan commitment over a 3 to 5 year period
✓ Consider consolidating multiple debts into one personal loan or a refinanced mortgage facility; however, keep the repayment terms the same or shorter
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The team at MCP Financial Services has specialised expertise in structuring complex debt arrangements. We can assist with review and restructuring, refinancing and renegotiating.