I am happy to announce there has been a rethink on the recording of late payments on a credit file.
As you may be aware, there has been significant changes to Australia’s credit reporting platform recently.
While I feel most of the changes are positive one point that was coursing a great deal of concern was the ability for a credit provider to record a late payment on a credit file in as little as five days. This meant that if a borrower was as little as five days late paying a bill they could end up with a black mark against them on their credit file.
While a late payment recording is not expected have the same negative effect on a credit score than a default or court action it will almost certainly have an impact on a credit score and if someone had multiple late payment listings this could end up having the same negative impact on a credit rating than a more serious listing such as a default or court judgment.
What was causing most of the concern was the five day listing term. I think it would be fair to say that most of us would be guilty of paying a bill five days late from time to time. To think that such an event could lead to a black mark being recorded on a credit file was concerning.
With a payment default an account needs to be at least sixty day in arrears which I feel is a fair period of time however to list a late payment in as little as five days seems to me to be inappropriate. I note that Dun & Bradstreet recently reported that many business pay there invoices in an average of 50 days.
It is clear that others felt a five day listing period was too short as this now been extended to fourteen days. In some ways I still feel this is a sort period of time given that such a listing may impact negatively on a person’s credit file however it is better than five.
My real concern is credit providers will be able to view this information on an applicant’s credit file and I fear that a late payment listing may prove to be yet another reason for declining an application. With the credit markets remaining very tight this could be a real blow for people who are trying to secure credit.
Imagine a bank error or misunderstanding leading to a bill being paid a little late and this one event being recorded on your credit file which in turn lead to your next finance application being declined.
Prior to the changes to the credit reporting platform this would have not happened as there was no provision to record such an event.
Only time will tell how the recording of late payments will impact on a credit file and people’s ability to secure credit however one thing is for sure, with many people paying their bills late credit provides will need to consider how they assimilate this credit information carefully as given they are in the business of lending money they will still need to lend to someone.