We are often asked about the problems with Australia’s credit reporting platform and comment on how many incorrect or faulty credit listings there really are.
I feel a good way to relay how big this problem really is is to reference the outcome of a survey conduced by Choice.
According to Choice there are currently more than 16 million Veda Advantage credit files in Australia and more than one in three may have errors or inconsistencies. That represents a lot of people being potentially inappropriately treated by credit providers.
Unfortunately most credit providers do not have the time or resources to work out what credit listings are right and which ones are wrong and due to this if a negative credit listing is noted an application will most likely be declined regardless. I am sure you will agree that this outcome is far from fair for people that are the victim of incorrect or faulty credit listings.
Even if the consumer calls the credit provider that declined the application on the basis of an incorrect credit listing they are unlikely to change the outcome as most credit providers utilise computerised credit scoring systems so once a decision has been made its final.
Why is the problem so huge?
To answer this question it is firstly important to understand the role of Veda Advantage and Dun & Bradstreet. As credit reporting agencies their core function is to record and sell information. Credit reporting agencies are naturally concerned that they are holding accurate information however as this information is entered directly by credit providers and there is little if any screening of this information prior to it being recorded the credit reporting agencies have limited ability to verify the validity of the information they hold, the saying rubbish in rubbish out is relevant here.
Once a credit provider is a subscriber of a credit reporting agency they are free to input information at will and it is due to this point that much of the information contained in credit files is not correct. It is interesting that there seems to be little training by credit reporting agencies with new subscribers on their obligations when entering credit information. I find this odd as subscribers of credit reporting agencies have a genuine responsibility to ensure the information they are recording is 100% accurate as a negative credit listing has the potential to negatively impact on a persons financial future for years.
It is my view that not all credit providers take this responsibility seriously enough.
At clean credit we often talk to credit providers that have entered negative credit listings such as defaults that are not correct or they have not followed the necessary process prior to recording the listing. What is particularly disappointing is the attitude of many credit providers when confronted with this fact.
Many are clearly not familiar with their legal obligations or disappointingly do not seem care that the law must be followed and feel they are able to do whatever they want.
To me it’s a little like handing someone a loaded gun but not showing them how to properly fire it.
It is clear that Australia’s current credit reporting platform is far from perfect and it is disturbingly easy for people to wrongly end up with a bad credit rating however there is good news on the way.
There are a number of proposed positive changes to our credit reporting structure due to take affect during the course of 2013. While not all proposed changes will end up as new policy I for one feel that anything that helps protect people from incorrect credit listings is a move in the right direction.