Why You Shouldn't Pay Bills Late From March 2014

As of March 12 this year (just 4 weeks away), the Australian laws for credit reporting is changing. Most people (60% according to the Australian Retail Credit Association) don’t know about this change, and it is perhaps the most significant legislation change to your personal finances in your lifetime.

So it’s worth sitting up and taking notice…

What is a “credit report”?

A credit report is a file which scores your personal finance history. The report is what a bank or any service provider uses to assess whether you’re a “good citizen”. It allows them to understand whether or not you have the capacity to pay for their services and what fees they should be charging to cover their risk. So it is the basis for how a bank picks and chooses its customers – whether they approve or deny your loan or credit card application.

Despite its importance, credit reporting is poorly understood by Australians. In fact, Veda the dominant credit report provider in Australia found that up to 80% of consumers aren’t even aware such a report existed of them.

What are the changes?

Australian credit reporting practices is changing to be inline with the rest of the OECD. Traditionally, we have used “negative” reporting – meaning the primary focus has been on whether or not you have been denied credit enquires in your history. Every time you’ve been requested and denied for credit products like a home loan or a credit card. While this is simple, the downside has been that particularly given rising house prices, multiple loan enquires and for increasingly larger amounts has been more common. So it’s been easier to rack up more bad marks against your name than ever before.

From March 12, this will change to “positive reporting” – meaning the assessment will be made with the focus on whether or not you’ve serviced your credit on time. Or in other words, whether you’ve paid your bills on time. In its totality, this is a fairer system because more data is considered so it’ll be a truer representation of how “good” you are.

Looking at January 2014 data in Pocketbook, 12% of all bills were paid late.

However, there is a downside. The implication of the new laws is that every time you’re late paying a bill, a black mark will essentially be registered against your name. While this sounds fair, the consumer behaviour truths make this worrying.

Starting off, only a small proportion of consumers are aware of credit ratings and the changes March 2014 entails – so no one actually knows that paying bills on time is going to be more important. Secondly, looking at January 2014 data in Pocketbook, 12% of all bills were paid late – so a significant proportion of people currently pay bills late by habit already. And finally, Veda last month reported that loan applications are at the highest level it has been in four yearsso more people are relying on their credit reports to get the finance they want.

These trends in combination means you should care. It also doesn’t help when the banks seem to be charging you illegal late fees on top of all of this.

[Tweet “With new credit reporting changes in March 2014, I use @Getpocketbook to manage my bills!”]

What can you do?

To minimise the risk of being straddled with bad credit, the best course of action is to make sure you pay your bills on time from March. A few novel ways you can make this easier for yourself:

  • Ask your provider to send all your bills via email and set up special tagging or folders in your email client.
  • Use the calendar function on your phone to set up reminders for due dates.
  • Download your bank’s mobile app, so you can pay bills whenever you’re out and about.

Finally, at Pocketbook, we’ve built the app with bill support from day one. We detect your bills automatically, forecast it and alert you when we don’t see it paid. Over the next few weeks, in response to the legislation change, we’ll provide a feature for you to alter the due date we’ve forecasted, to make sure this is even more accurate in the fight to maintain your good credit.

63 Comments

  1. Ben   •  

    Supposedly companies can backdate data to Dec 2012 though, so it may be too late for those late bill-payers over the past 14 months…

  2. Robert Northway   •  

    Better! But still very unfair as it does not reflect the customers’ true position.

    When making an application the customer is asked to state their financial position and be truthful in doing so. Efforts should directed to supporting this through requirements to provide documentation, statutory declaration, references etc etc. On the credit providers’ side adequate advice should be provided that payments are due (by more than one means and more than once. Crucially, non-penitential advice/warning should be provided at the time of late -payment and if the oversight is corrected within 48 hours no penalty should apply (economically the downside for credit suppliers will be balanced by those that actually pay early – they do exist).

    With current Veda type arrangements and continuing with the new guidelines, disadvantaged customers are penalised heavily and not rewarded for good management in difficult times.

    Everyday, we get news that times are tough for the majority of us. Now more than ever we have a middle class poor who, given the current political situation, are drawn upon heavily to support society economically and who recieve little relief from taxation. Single income families fall into this category and need help. Given childcare costs today, it is a major benefit for society if one parent can remain at home (if they wish).

    • Bosco Tan   •     Author

      Yes, agreed Robert. It’s especially damaging for those paycheck to paycheck households. I’d hate for us to perpetuate into a society where “good credit” is held as a status label like the US.

      That said, what’s interesting is the number of new innovation that’s happening to help the consumers stay on top of their credit position in that part of the world. What we’re doing with the bill reminders is to take some leadership on the consumer side here in Australia. We’ll continue to evolve Pocketbook for the purposes of helping Australians on issues like this going forward.

      If the authorities can’t provide the advanced warnings, we’ll figure out a way to do it.

  3. Lessan   •  

    Is there a way to access the credit report on ourselves?
    And do the black marks go away after a while?

    • Elle   •  

      You can contact Veda advantage and obtain a copy of your credit report. You cna get a free copy (just takes longer) or pay for one. You can also get “My Credit Alert” which is a 12m subscription service, which will notify you of any changes to your credit report.

    • Shaun   •  

      You can apply to VEDA Advantage for a credit report as I have done in the past. It is also helpful as it will tell you whenever someone has applied for credit in your name as part of that fee for 12 months, which means you can jump on the identity theft trail a lot quicker than waiting until you have received a 50K Visa bill for a credit card in your name, then have to prove that it is not your card. Instead, you can call straight away and say that you have not applied for xx credit with xx company and they can stop the card being issued in the first place. 🙂

    • Bosco Tan   •     Author

      Agree with Elle and Shaun – Veda has a product. But there are also a few others coming into the market. Experian and Dun & Bradstreet are interesting to watch in the consumer space going forward.

  4. Peta   •  

    Lessan, you can apply to Veda for a free copy of your credit report, google their website, you can pay to receive it quicker eg less than seven days. Think there is is a 5 or 7 year period, though I’m sure it tells you on the Veda website.

    • Bosco Tan   •     Author

      Thanks for the information for our readers Peta.

  5. Simone   •  

    I’m just wondering if it’s true that the data can be back dated to 2012? I think this is very unfair that a law can be changed now and your previous 2 years of credit history can affect your current or future situation. What happens to people who may have had a redundancy or loss of work for some other reason? People who may have over come some sort of struggle and now are doing well. Does this mean they will be seen as a “bad” credit risk due to their past because of a new law with a back date of personal information? I think this is a terrible and unfair situation for people. There are to many variables in digging up the past. If a changes now, it should be going forward. I don’t believe the data from 2012 should be entered into the change.

    • Bosco Tan   •     Author

      Hi Simone. I’ll be doing some fact checking on the 2012 issue. The problem is they need to start somewhere with the new credit reporting. So it’s likely the old history is the foundation they’re using. But perhaps there’s an interim calculation which uses both methods to work out a hybrid score. I believe there will be more transparency on this as the legislation shifts.

  6. Naomi   •  

    This might sound really silly, but does this apply to all bills!? We are usually pretty good, if we find it hard to pay a bull up front I’m the first one on the phone organising a payment plan! Will this also leave a black smudge on my credit report? We are unfortunately one of the fortnight to fortnight families, it’s tough!! So does this apply to bills such as electricity internet etc or just credit products such as credit cards and home loans???

  7. Brad   •  

    So is there any more resources anyone can share about these new laws? Also what about entering into “hardship” arrangements with a credit provider … will they be shared on credit file?

  8. Rachel   •  

    The thing is I have a great credit history and I pay all my bills weekly so I don’t get a bill 1 income house hold and if the payments Iale cover my bill in a couple of weeks I let it pay it off I always pay more on my loan than I have to so me paying my bills like I do I will be recorded as bad credit now ???

    • Bosco Tan   •     Author

      If in majority of the cases you cover your bills on time, I think you should be fine.

  9. Jason   •  

    I’m not really so sure it’s going to be a good thing.

    What we’ll see are people taking out credit cards so they can establish ‘good history’, and therefore qualify for a home loan. People who have no history, strangely, may find themselves penalised for not having a credit history.

    As a commercial lender, I’ve always found this idea strange. I regard someone who’s never used personal debts as a good credit risk, not someone who should be punished.

    • Bosco Tan   •     Author

      Means testing is never a great thing. There are always going to be borderline cases that gets punished. I just hope they extend the current method to make sure the new methodology is well worked out before setting on it.

  10. Renee   •  

    Thanks for the article. So if the start date for this is next month (ie, March 2014, and ?? backdating to 2012 ??)… why do so few people know about it? I only found out about it through a link to this page that someone shared on Facebook. Is there any education, or advertising planned to inform the general public? Especially on how it can/will affect them for their future planning? This is definitely something I think many struggling people (myself included), would really like to know.

  11. Paul Broadhurst   •  

    Our politicians need a reality check. They just pass laws with out advising the public. Seems like a secret society club. When will they ever learn. Pass laws but for heavens sake don’t tell anybody!
    The mindless of it all, Disgusted

    • Bosco Tan   •     Author

      I suppose there are benefits for being more aligned to OECD practices broadly. And like Robert mentioned above, it is a better system than previously – albeit still not totally fair.

    • John   •  

      There many on pensions that are fast being unable to let people meet their bills because the price of e.g. utilities is rising faster the CPI.
      As an advocate I have to speak on behalf of these people but frequently these, now private corporations, threaten to cut services. People are going without food and other essentials. Many do not seek medical/hospital treatment because they cannot afford it. Public hospitals are turning more of the facilities over to specialist rooms and the waiting list do not get any shorter as a result. You will see more and more people who will be in this situation and as a result will get a “black” mark against their credit rating.

  12. Ed Rolfe   •  

    Bosco, is there a process for mitigation? Issues/reasons such as moving house/delayed postal re-direction; poor re-provisioning of service (e.g. ISP); disputed bills; rare case of over-sight, etc.?……

    • Bosco Tan   •     Author

      Hey Ed,

      I’m not certain about this. The good news is that one bill in the history of bills paid on time isn’t going to matter much.

      Today, there’s no real recourse for the consumer to dispute a decision made by a finance provider should they deny an application. So I think this lack willingness or capacity to make exceptions will remain. You know.. the usual story of “I’ll have to talk to my manager’s manager…. ” when you speak to your primary loan officer.

  13. Cameron Marsden   •  

    Guys – a couple of things to keep in mind.

    Yes, these changes may sound scary – but the reality is we are playing catch up with the rest of the first world countries (in terms of legislation).
    Further, and I would say more important for you to understand, is that each and every time a company wants to make a change to your file – it will cost them money.

    For that reason, only the larger companies are bothering to make any changes to their billing software (not simple and very costly) and they will only list you after an allotted period of time.

    Take an electricity provider as an example – if they were to list you within 7 days of your bill being overdue, this new legislation would cost them millions in constant credit updates.

    Also, as each of the credit bureaus maintain their own databases separately, your new credit provider would need to search all of them to get a complete picture.

    You will find generally that unless they are about to take action against you (usually after 3 or so months of non payment, depending on the service in question) nothing at all will happen.

    • Dave Austin   •  

      I’d like to see stronger penalties for incorrect black marks on credit reports. If a bill is disputed and a black mark added before the matter is resolved and it’s resovled in the consumer’s favour then what penalty does the institution incur? Because as I understand it once an item is added to a credit report, good or bad it cannot be altered even if incorrect.

  14. Michael   •  

    Thanks for the concise and easy to read explanation of the new credit reporting regime.
    Definitely much easier to understand than the information put on the official government sites.

    We will let our subscribers know and also link to this post so they can read it all themselves.

    Thanks again

    • Bosco Tan   •     Author

      Thanks Michael! That’s great! Love what you guys do also

  15. Amy   •  

    This is ridiculous, watch the economy come crashing down, some ppl live week to week, fortnight to fortnight or even month to month, and I work my butt off n I’m occasionally the odd few days behind because my pay is the following week, or kids need extra stuff, life happens why penalise us for, watch the world go to crap now,

    • Bosco Tan   •     Author

      Hi Amy, I agree with you that this will be challenging for those that live week to week. Hopefully we can help you manage cash flow better with what we’re doing at Pocketbook.

  16. Lois   •  

    Curiously, If you pay, say a credit card bill, on the same day (but just prior timewise to), your statement issuing, it does not link in the bank computing system as a payment on that statement and you will be penalised as not paying the statement bill, so don’t get too ahead of yourself. I did challenge the bank at the time and I was relieved of penalty but was told to pay the day after the statement was issued in future to prevent the problem. So don’t anticipate a bill, wait for it to issue.

  17. Jon   •  

    In regards to credit reports, don’t even bother with Dun & Bradstreet, i recently obtained my report from them and it had an Optus account i opened 3 years ago and nothing else.

    Veda on the other hand had everything i have applied for.

    I think this change will be good for people like myself who pay bills on time every time, however may provide a bit of a shock to people who struggle to pay on time.

    I will also be watching my “vedascore” like a hawk over the coming months, in the 4 months i have been a subscriber i have not had a change in my score, so when this comes into effect i’d be expecting my score to go north due to not having any late payments and no recent credit applications.

    If the above does not happen i think the score itself is cock & bull.

    • Bosco Tan   •     Author

      Sure. Thanks Jon – Veda is the incumbent and should get it more right than others. But that said, the change brings in plenty of opportunity from global players like D&B and Experion (who are in fact leaders globally where “positive reporting” have existed for a while).

      I’m sure these players will catch up very soon and other innovative companies will emerge. The space is going to get crowded!

  18. Didgge   •  

    Really! You can get a free Credit Report on yourself withing days 10 from Veda Advantage?
    Goodluck with that!

  19. Lucy   •  

    How do you get your score? I’m a subscriber with Veda and they’ve never sent me a score.

    • Bosco Tan   •     Author

      I’m sure the marketing engine will kick in over the next month or so.

  20. Ro   •  

    What happens in cases where the bank has made errors and billed you incorrectly, which is what happened to me recently. I therefore did not pay the bill until they sorted out the mistake, which they did eventually, but only after the due date of the bill had passed. So my record will now show a late payment, but will it show the details of why it was paid late?

    • Bosco Tan   •     Author

      Hi Ro, I’m not certain what happens in these instances. As I’m sure you’re aware, due to their size there are many cases where the bank’s left hand doesn’t speak to the right hand – meaning that your records with different parts of the bank may not be consistent. So doing the best you can with paying on time and making sure you work with your bank is the best you can do.

  21. Greg   •  

    Isn’t it about time that we should be able to have credit card payments due on the same date every month? We have this for mortgages, why not cards as well? A few years back when I went to check what dates my payments would be due the bank staff could only tell me the date for one month ahead. After that even they were unsure. And I’m guessing that if you’re a day late here and there you might start to accumulate black marks on the your record.

    • Bosco Tan   •     Author

      I thought the payment is typically due at the same time? Unless you spend without a regular pattern on the specific card?

  22. lenny   •  

    Interesting, I’ve seen the debate for both and against this, the source for both sides having strong arguments. I’m still on the fence for now. Bosco, what are you thoughts on using providers such as MyBudget will help people to stay ‘clean’ on their credit reports.

    • Bosco Tan   •     Author

      Thanks Lenny. As I said, I think it’s a step forward in the scheme of things. But it requires more consumers to be aware so everyone is treated fairly. Overall, I’m for any service that makes sure you pay bills more regularly and gets your finances sorted. Especially Pocketbook! Which doesn’t actually create another monthly bill for you either 🙂

  23. Emma   •  

    Can Pocketbook develop a way of ticking off bills as being paid early? I am quite finicky about paying early and would like to have an easier way of keeping that stuff up to date. I certainly don’t want a bad credit rating when I start applying for home loans!

    • Bosco Tan   •     Author

      Hi Emma, drop us an email. But the current bill detection has a 3 day buffer period either end.

  24. Daniel   •  

    As a young adult I’m worried that this means we’re moving to a system like the USA where you MUST play their game to get a good credit rating even if you never WANT the credit.

    For instance many people are stuck using credit cards regularly every week just so they can build credit because not being in debt at all is a significantly worse credit score.

    How is this going to be different? Is it based on all bills? Or does it primarily take into account credit card payments?

    • Bosco Tan   •     Author

      Hi Daniel, as I’ve said before, the system is technically fairer than the way we’ve had it. If you service your credit, then you should get more credit – the principles are sound. It’s based on credit related products initially. meaning homeloans and credit cards.

  25. Chris   •  

    What if I pay by the due date by BPay, which takes a number of days to process. Will this be seen as a late payment? As far as I’m concerned, I’ve paid by the due date. the money is gone from my account, but I’ve received numerous “Late” notifications when this has happened.

    • Bosco Tan   •     Author

      Not certain Chris. I’m sure there is some buffer on this.

  26. Kylie   •  

    As a matter of interest – how is the repayment history information fed in? Does it come down to each lenders accuracy and efficiency and also their timeliness to log their data?

    • Bosco Tan   •     Author

      Hi Kylie, Lenders have this information which a credit bureau aggregates, matches and then feeds back to the lenders.

  27. Shane   •  

    does this apply to not paying the full amount of your CC balance each month? or would it only apply to the minimum required payment?

  28. Read   •  

    Back dating it is certainly not CRICKET!!!!
    The govt should make all the banks that have ripped off
    Australians in over due fees ect.. Pay back that money
    and back date that till beginning of time, seriously bringing in a new
    Policy and backdating it is pure madness!!

  29. Mick   •  

    Why am I not surprised. The ATO have been back-dating new rules for ages. This is simply the government in bed with the banks to rake even more money in from the people via new levels of interest. The fact that it was done on the sly with 80% people not knowing about it, that it benefits both the government and banks but not the people, and that its been back-dated to 2012 just reaffirms to me that the Australian people are currently being ruled by the biggest organised crime unit in the world – the Australian Government. If the government can make up laws on the fly like this without telling or asking us about them, then nothing is safe, and the wars we fought for freedom many years ago were all for nothing. The Governments objective has become to run the country like a company and therefore its first agenda is to make money not for the people, but for itself; by taking it from the people. It wont only be banks that will have a stake in our credit rating – it will be other companies as well as the government will allow this new law to operate as a “service” and charge companies the right to put black marks against our names..

  30. Jim   •  

    Three things everyone should know about this.
    1. This legislation only covers credit providing companies, so bills like electricity, phone, gas etc does not get reported for credit purposes.

    2. The major banks would have to make to make significant changes to their systems to feed this extra info to the 3 bureaus.

    3. I understand that the banks have not yet agreed to share this extra info as it will mean other banks would have access to it.

  31. Samantha   •  

    Well this is great but it’s not. I’m finding it hard enough trying to finance a car I unfortunately have to get as I care for my terminally I’ll mother AND raise a 2 year old alone, I’ve been perfect with my loans and a small one I’ve had the broker the selfs messed it up and now I’m paying for it, I don’t know where to turn to be perfectly honest but hopefully with this new system the car company I’m going through will understand what I try to tell them!

  32. Maria Cameron   •  

    Now I know why my daughter can’t get a loan for a very much larger car, I thought pensioner was a dirty word she has 3 children of her own plus 3 foster children, all she can get is a no, for a loan, not like she wants a new car or the whole loan,

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