Credit and your privacy
Credit reporting changed on 12 March 2014. The new comprehensive credit reporting system brings new benefits for consumers. Find out how it could impact you here.
What is credit?
Credit is an agreement between a borrower and a lender, where the borrower receives something of value and agrees to repay the lender at a later date. For example, when you sign up for a credit card, personal loan, mortgage, mobile phone plan or electricity package, you are agreeing to use their products and services now and pay them for them a later date. Credit also relates to the borrowing capacity of an individual or company.
Types of credit
There are four main types of credit available:
This type of credit allows you to borrow money from a lender and receive an asset which the lender is entitled to take back if you don’t meet the obligations outlined in your agreement. A car loan or a mortgage are common examples of secured credit.
Unsecured credit means that you simply agree to repay what you borrow from your credit provider. Examples include credit cards, mobile phone plans, and utilities bills such as those for electricity or gas.
Revolving credit means that the lender has allowed you access to a particular credit limit. You can access this credit as often as you like, as long as you meet the minimum monthly repayments on your outstanding balance. Credit cards are a good example of revolving credit.
This type of credit allows you to borrow money for a one-off purchase, which you then repay in instalments over time. Examples of this include mortgages, personal loans and interest-free store loans.
Why can credit be a good or a bad thing?
Credit can be a good thing as it may help you obtain products and services you may not otherwise be able to afford straight away, such as a holiday, house or car. However, if you over-extend impacting on your ability to pay off your loans, or are unable to meet your financial obligations, it can turn into quite a stressful and negative situation.
What happens when I make an application for credit?
When you submit your application to a bank or credit provider, they assess the information you have provided on the application form, in conjunction with any information they may already have about you. They may also conduct a credit check, which may involve obtaining a copy of your credit file and obtaining a VedaScore. If they do access your credit file, they will notify you in advance, usually within their application terms and conditions.
What is a credit bureau?
There are a number of types of credit bureaus – some only hold commercial credit information for companies and businesses, while others only hold information about individuals. Many bureaus hold both commercial and individual credit information.
Veda, through Veda Advantage Information Services & Solutions Ltd, operates a credit bureau which includes information used for credit and financial risk management purposes. We hold three types of information in our credit bureau – consumer credit information, commercial credit information and public-record information.
What is the role of a credit bureau?
The primary role of a credit bureau is to generate and share information, providing lenders and other organisations with details on credit files and bureau scores to help them assess applications for credit, and for other financial risk purposes.
While most credit bureaus generate and share credit files and bureau scores, the decision as to whether or not to extend credit or whether an application for credit should be accepted or declined rests with the credit provider.
Why are credit bureaus important?
Credit bureaus like Veda are vital for secure and cohesive information-sharing among credit providers. Benefits of credit bureaus include:
- The ability for lenders to assess risk, allocate credit more efficiently, and reduce their exposure to bad debt
- Higher levels of credit availability and lower interest rates for consumers and businesses
- Their ability to stimulate economic spend which in turn supports the Australian economy.
Who owns Veda?
Veda is a private company owned by investment group Pacific Equity Partners (PEP).
Who regulates Veda?
Like other organisations that hold personal information, Veda has obligations under the Privacy Act 1988 (the Act). Veda’s credit reporting agency has additional obligations under the Act with respect to consumer credit information it holds.
How does Veda obtain my information?
Most of the information stored within our credit database is provided directly by credit providers such as banks, credit unions, phone companies and utilities providers. We also collect publicly available information such as directorship information, court judgments, court writs and bankruptcy data.
How does the Privacy Act affect my credit information?
The Privacy Act 1988 (‘the Act’) provides safeguards for individuals in relation to consumer credit information, outlining who can have access to an individual’s credit information file and for what purpose. In addition, the National Privacy Principles of the Act deals with the collection, use, access and disclosure of other personal information relating including commercial credit and publicly available information.
What information does the Act allow Veda to hold?
The Act places a number of obligations on how credit bureaus (or credit reporting agencies) hold consumer credit related data (credit information files). This includes:
- Limits on the type of information which can be held on an individual’s credit information file
- Limits on how long the information can be held on a credit information file
- Limits on whom a credit reporting agency can disclose personal information in a credit information file to, and for what purpose
- Limits on the purposes for which a credit provider can use a consumer credit report obtained from a credit reporting agency
- Limits on disclosure by credit providers of information contained in consumer credit reports, including creditworthiness information
- Rights of access and correction for individuals with respect to personal information
- An obligation on credit reporting agencies to take reasonable steps with respect to accuracy and security of personal information in credit information files.
For more information on the Act, visit http://www.oaic.gov.au/privacy/privacy-act/credit-reporting
In accordance with the Australian Privacy Principles section of the Act, Veda has a privacy statement which is available on this website and at www.veda.com.au/privacy