Is Comprehensive Credit Reporting the key to driving innovation?

Is Comprehensive Credit Reporting the key to driving innovation?

It's no secret the July 2018 introduction of mandatory comprehensive credit reporting (CCR) has ushered in a positive change for consumers. However, with only 50 per cent of credit data now shared as a requirement, will the financial services sector be ready to release 100 per cent of its data by mid-2019?

Daniel Wessels, who won the Business News Australia 2018 Young Entrepreneur of the Year Award for Professional Services, has shifted his business into gear ahead of time to anticipate these changes.

While it's not compulsory for non-bank financial institutions to contribute to CCR, Jacaranda Finance is able to do so.

Not only will the Jacaranda Finance team be actively working towards improving the credit scores of clients but providing other financial institutions with a more detailed overview of borrowers.

"We were really excited to hear that mandatory comprehensive credit reporting was coming into place," says Wessels.

"At this stage, we know that positive credit reporting is only expected from the big four banks, however, smaller lenders have the option to partake if they wish.

"As a small, family-run lender, we pride ourselves on being a lender for all Australians, not just those who have a perfect track record. That's why we will be ready to roll out positive credit reporting come 1 July."

The banks' internal systems have been built to accommodate a negative reporting system. Therefore, it will require expensive and complex updates for them to share larger amounts of data publicly.

Wessels believes CCR will apply competitive pressure to the banks' oligopoly, forcing them to adopt more fintech to lift their own games.

He says Jacaranda Finance already has the resources to provide the innovative systems needed to raise the bar.

While the company is fully equipped to welcome such change through its doors, for clients who have had credit mishaps it offers the chance to build a more comprehensive credit portfolio rather than being dragged down by mistakes of the past.

Wessels says Jacaranda also allows consumers access to better deals on finance from their chosen lender.

Lenders like Jacaranda who choose to follow comprehensive credit reporting will also be taking less risk when assessing and approving applications. This is due to the fact they will have access to the positive data that the banks are providing to the credit bureaux.

But as CCR is not compulsory for smaller lenders, they may choose not to participate. This will mean that, while they do not have to report positive data, they will also not have access to it.

"From a lender's perspective, CCR just plays into our responsible lending practices, allows us to be more compliant, and makes it easier for us to accept in-need clients who may have otherwise been turned away. Essentially, we can take our responsible lending practices to the next level and so we are 100% on board," Wessels adds.

"Then, from the perspective of the consumer, comprehensive credit reporting means that they can now seek credit in a much fairer system. For example, positive data may help potential first home buyers who don't have a long credit history to be approved for a mortgage, when they would likely have been declined in a negative reporting system.

"Positive credit reporting just means that instead of lenders basing their assessments on a negative reporting system that may hide someone's eligibility for a loan, they can now form their approvals around a much more extensive set of data."

Jacaranda Finance CFO Peter Wessels says Jacaranda welcomes the introduction of comprehensive credit reporting in Australia as it will bring the country in line with other major international economies

"Comprehensive credit reporting is the real-time tracking of how a consumer is handling their finances and will open new opportunities and rewards for those people who are doing it well," he says.

"It also gives consumers the opportunity of repairing credit ratings which might have had a few blemishes.

"All around, it's a much fairer way of interpreting a consumers creditworthiness at the present time and we look forward to seeing how it will positively impact our lending practices and the borrowing behaviours of our clients."

Jacaranda Finance will be rolling out a positive credit reporting system along with the big four banks on July 1 2019.

Jacaranda Finance is an ASIC-regulated lender based in Brisbane, Australia. Australian Credit License number 456404.

This article is brought to you by our commercial partner Jacaranda Finance

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