There are strict requirements in Australia for any credit providers - including any business that allows deferred payments for more than seven days, like electricity and gas providers - to report relevant information on an individual to the credit reporting bureaus.
When someone applies for another credit product, this information then needs to be readily available to the new provider, all while complying with the National Privacy Act.
Clearly, all this is necessary, but like anything, the system is susceptible to faults. It's a thin line between responsible lending and unfairly locking people out of the market for loans. And when there are errors in the credit reporting process, this line can be crossed.
Just ask Craig Baer from Shellharbour, who's had numerous disputes with credit reporting agencies and providers since 2015. He says he's had default notices against his name because the previous owner of his house didn't pay their electricity bill, as well as numerous credit enquiries and accounts stay on his credit report far longer than they should have.
He shared a copy of his report with illion from 2021 with Savings.com.au, which showed a loan account that was supposed to have been wiped by October 2020 (Savings.com.au reached out to illion for comment).
"I'm sick and tired of waking up in the morning thinking about credit reporting," Mr Baer told Savings.com.au.
Laurence Barlow, CEO of Credit Reboot, says this is not unusual.
"Out of the thousands of credit files we have reviewed, very few are without errors of some type. It's getting much better with technology upgrades, but far from ideal," he told Savings.com.au.
"An outdated or inaccurate credit enquiry on your file can reduce your credit score by 50-100 points."
A spokesperson for Equifax, the largest of Australia's three credit reporting bureaus, told Savings.com.au it takes "reasonable steps in the circumstances to ensure information [in reports] is accurate, complete and up to date."
"Equifax releases an annual report on credit reporting, available on its website, which includes information on corrections requested and made."
There is a procedure in place to fix up credit reporting errors. Equifax said the quickest way to have faults corrected is to contact the credit provider, who then advises the bureau on any corrections that need to be made. The Customer Resolution team then investigates and has a response within 30 days.
However, there can be complications. When AGL (the electricity provider) disputed Mr Baer's version of events, he had to reach out to the financial ombudsman (now the Australian Financial Complaints Authority, or AFCA) for a resolution.
"It took 12 months of me screaming at AGL and the ombudsman to fix the problem," he said.
An expensive wait
If, for example, you're looking to refinance, time can literally be money. Per Equifax and Experian, complaints are generally resolved within 30 days, but if there is a dispute from the credit provider, you might need to go to AFCA, which might take longer. Last year, there was a record 102,790 complaints lodged with AFCA. This was up 23% from 2022 - a rate of growth AFCA CEO David Locke called "unsustainable."
"The volume of complaints reaching us is putting unnecessary pressure on the external dispute resolution system and inevitably causing further delays for consumers," he said in January.
Let's take a hypothetical mortgage holder looking to refinance from 7% to 6% p.a.. When they initially applied, they had $400,000 and 20 years remaining on their home loan. This is the difference in repayments comparing if they were able to refinance right away with a delay of three months.
| Refinance right away | Three month delay | Difference | |
|---|---|---|---|
| Monthly repayments | $2,866 | $3,101 | $235 |
| Over three months | $8,598 | $9,303 | $705 |
*Calculated using the Savings.com.au repayment calculator
Those looking to buy can also be stung by delays. According to CoreLogic, the national median property price rose 1.7% over the three months to July '24. In booming markets like Perth (up 6.2%) and Adelaide (up 5%), quarterly growth was even stronger.
Imagine a budding first home buyer in Perth who was looking around the $500,000 price point in April this year. If there was a delay that prevented them from borrowing money until July, equivalent houses might be about $31,000 more expensive.
Credit reporting errors - what to do
If you've been affected by something like this - or are looking to protect yourself from similar issues, there are a couple of steps you can take.
Proactively check your credit report
All three credit reporting bureaus encourage frequently checking your credit report and correcting any errors. You can generate a free report at all three, so it's a good move to make sure everything on there looks okay.
Mr Barlow said one of the most common issues involves credit information staying on file for longer than it should.
"We handle several cases each month where the credit file information is outdated and affects the person's creditworthiness," he told Savings.com.au.
Per the Office of the Australian Information Commissioner, this is how long things are supposed to stay on your credit report.
| Must be gone from your credit report by… | |
|---|---|
| Bankruptcy/debt agreement | The later of:
|
| Court judgement | Five years |
| Credit enquiry (e.g. Applying for a loan, applying for a new phone or electricity plan.) | Five years |
| Credit account | Up to two years after account closes |
| Default | Five years |
| Financial hardship information | One year |
| Repayment history | Two years |
| Serious credit infringement (e.g. Someone with an unpaid debt who has not had contact with the credit provider for over six months despite attempts to reach them.) | Seven years |
Consult credit repair firms
Credit repair companies like Credit Reboot exist to help with resolving these situations. Mr Barlow says his clients are often granted compensation for opportunity losses as a result of the delays or failure in acquiring credit. On top of this, AFCA also sometimes awards compensation for non-financial loss in cases where there has been an unusual amount of:
-
Physical inconvenience
-
Time taken to resolve a situation
-
Interference with the complainant's expectation of enjoyment or peace of mind
Mr Barlow said in practice, this can mean compensation for stress and anxiety caused by the errors.
"Compensation can range from $500 to more than $6,000 for the most serious breaches," he said.
He said 'non-financial loss compensation' is commonly referred to as 'non-financial compensation', which he said is a deliberate attempt on bank's behalf to make customers believe they won't get any money.
"Many consumers believe there is no cash compensation, but AFCA awards thousands each month for these types of breaches."
Credit reporting bans
All three credit reporting bureaus allow you to put a temporary ban on your credit information being given out. This is useful if you have been a victim of, or think you may have been victimised by, personal fraud.
Savings.com.au's two cents
Few people would seriously argue that credit reporting needs to be ditched entirely. As recent history demonstrates, our financial systems and the economy at large relies on low credit delinquency rates - so it's crucial for banks to do due diligence on borrowers.
However, it's equally if not more important that the system works for everyday Aussies. In 2024, with the cash rate the highest in a decade, any friction in the financial system can be hugely detrimental. Some mistakes are inevitable, but for some Aussies, like Mr Baer, there are structural problems with the credit reporting sector. He's particularly frustrated with its current reliance on consumers reporting errors with their credit reports.
"[You have to] run around like a headless chicken screaming to every Tom, Dick, and Harry to fix problems that the credit reporting system is supposed to fix," he told Savings.com.au.
Mr Barlow thinks that errors on behalf of the credit reporting bureau are normally admin or IT-based, but said it's possible that on the banks' side, there might sometimes be something more insidious going on.
"Bank errors they claim as admin issues…[may] occasionally be operating on an agenda, such as trapping a client on a specific lending product," he told Savings.com.au.
Wherever you stand, or wherever you lay the blame, there have been enough issues with the credit reporting sector for the Attorney General Department to launch an independent review of the credit reporting framework, due in October. The Government says it will examine the "effectiveness and efficiency" of the current credit reporting provisions.
Image by Dylan Gillis via Unsplash
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