Credit reporting needs to change to include positive behaviour too

A credit file is basically a report card for adults.  It details previous financial history such as loans you've taken out, credit applied for, address and employment information.  All credit reporting agencies such as Veda and Dun & Bradstreet give people a score.  In Australia the score ranges from 0-1200.  600-800 is most common.  

Different calculations are used when determining a credit score.  

35% - Payment history - In order to maintain a good credit rating you must make sure you pay all your bills on time.  Credit reporting across the world has become much tighter following the 2007-08 crash and now includes defaults on utility bills of 60 days or more.

30% - Credit utilisation - You should aim to only use 30% of the credit you have available and should not max out your credit cards or overdrafts.

15% - Length of credit history - The longer an account is open the better as it proves you can maintain long relationships with credit providers.

10% - New credit - Opening too many accounts at one time can adversely affect your credit rating and could increase the likelihood of a default.  This will make you look unattractive to lenders.

10% - Credit mix - Lenders like to know that you can reliably pay back loans with instalments and use revolving credit wisely.  If you can use different types of credit then you'll be deemed less of a risk and increase the chances of obtaining credit from banks as opposed to greasy loan sharks who often have much tighter lending criteria in that the loan terms are shorter.

Currently only negative history is recorded on your credit file.  Credit reporting agencies only report defaults and inquiries.  They do not report when a debt has been paid off in full so if you have bad credit but have changed your ways it is very hard to improve your credit score.  People should be rewarded for prompt payment.  You could potentially have a bad credit history but be ahead on bills and payments which are not recorded, therefore the full picture is not being shown and lenders are only receiving half the story.

In addition, credit reporting agencies do not currently collect savings data and habits.  It may be that you save money regularly but this isn't recorded so again, you look like you'll be a high risk to lenders.

Credit histories are only a snap shot of ones financial habits but they don't show the good behaviour.  If the bad behaviour is being recorded then shouldn't the good behaviour be recorded as well?  If you take out a personal loan wouldn't it be good if lenders knew if you paid that bank on time or even early?  Take someone who has a gym membership?  If they are ahead on their payments doesn't that show budgeting and that they are reliable?

Why do we live in a society fixated on punishing bad behaviour but not rewarding good behaviour?  Credit files affect so much of our lives that it's essential that financial institutions and real estate agents see the full picture rather than just the negative aspects.  It's currently very unbalanced.

If you suspect you have bad credit you can go to Veda and request a free copy within 90 days of being declined for credit for free.  If you'd like to obtain it quickly then expect to pay between $69.95 and $119.95.  If you want to track changes regularly then you should ensure you get the $84.95 12 month subscription and then you'll receive updates during the course of the year.  You will get two reports and a credit score updated every month so you can track how you're going and reduce your risk profile.