Australians who maintain payments on their credit products will soon benefit from positive credit reporting, the Herald Sun reports.
Traditionally, credit reports have highlighted weaknesses in historical activities and have paid little attention to strengths. An individual who keeps up with the repayments on their home loan for 20 years will receive no benefit to their credit score as this positive activity would not be included.
Instead credit reports have focused mainly on negative activities such as late bill payments and frequent credit applications. If the same individual who maintained payments on their mortgage for 20 years applied for three credit cards during a one week period their credit score would drop.
Under the current system the three credit card application would be an indication that the individual is credit hungry and possibly in financial distress so it would reduce their overall credit score. The maintenance of the home loan payments would not be factored into the score and would therefore offer no positive benefit.
Positive credit reporting would force credit scorers to include the positive activities as well as the negatives. This will give a clearer indication to financial institutions as to the credit worthiness of an applicant and will therefore benefit those who pay their bills on time.
Australians can access a copy of their credit report through credit bureaus such as Check My File.
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