New study from Veda reveals that more than 930,000 people, who may have been financially excluded under negative credit reporting, now have a credit profile, thanks to Australia’s shift to Comprehensive Credit Reporting (CCR).
The number of people building credit history is growing at a swift rate, according to Veda, a wholly-owned subsidiary of Equifax. More complete credit profiles are proven to aid Australians in accessing credit and help lenders better manage risk.
Released today to coincide with the 2016 Australian Retail Credit Association (ARCA) Conference, Veda’s two studies provide lenders with both a pulse-check on the industry’s transition to CCR and reveal insightful trends from traditional negative reporting.
“Lenders are regularly loading CCR data on more than 5.4 million Australians to Veda’s bureau. It stands to reason that the number of people positively affected by the change will continue to increase in line with lender participation,” said Mike Cutter, Veda’s Executive General Manager, Credit Risk and Advisory Services.
For the 15 million Australians that already access credit under negative credit reporting, CCR adds another layer to an already diverse credit profile at Veda. The recent study on consumer bureau insights reveals that only 56% of enquiries come from the largest lenders. The remaining balance is spread across various industry sectors and shows the wide variety of loans consumers are accessing.
“The insights that come out of Veda’s consumer bureau are invaluable to lenders and financial institutions, because they offer a more holistic view of their current and prospective customers, what they want and how best to build a relationship with them,” Mr Cutter said.
For lenders, CCR means increased insight into a customer’s ability to service a loan once approved. For Australians with CCR data loaded, the study reveals 21% have more than one lending relationship. This means lenders can start to understand the risk profile of their customers at other financial institutions.
For example, Veda’s research reveals that of the Australians with CCR data loaded, 2.7% are in arrears, or at least one payment behind on an account that has not yet proceeded to default, bankruptcy or court action. A total of 16% have been behind on a payment at some point over the last 24 months.
“CCR data on who is, or has recently been, in arrears and their behaviour once they fell behind in their payments, gives lenders advanced warning of who may recover versus who will likely proceed to default. This allows for a level of proactive account management that simply isn’t achievable without CCR data,” Mr Cutter said.
Veda’s new suite of Portfolio Management Solutions capitalises on these new insights from CCR as well as traditional negative reporting with scores to predict future behaviour and alerts to provide advanced warning of financial difficulty with another lender.
“The solutions are built using CCR data supplied by lenders to Veda during our market leading pilot study and validated against actual customer behaviour. This means early industry participants can take advantage of CCR insights to manage their existing customer base right away,” Mr Cutter said.
“By combining the emerging CCR data with Veda’s existing wealth of insights on credit active Australians, we can provide lenders with the most complete and dynamically updated picture of a person’s financial situation,” he added.
The full results of Veda’s CCR State of the Industry can be found here.
Source: Veda Press Release