Small lenders have been quick to back a new regime which Treasurer Scott Morrison believes will offer the well-behaved borrowers the best deal when seeking a new loan.
The federal government will introduce a mandatory comprehensive credit reporting regime for banks and other financiers from July 1 next year that will make credit information available on the positive attributes of a consumer's credit history, not just their negative points.
That's in contrast to negative credit reporting that dominated the lending landscape for decades and where people were docked points for any negative spots on their credit history when applying for a loan.
Mr Morrison told a FinTech conference in Melbourne on Thursday the new regime should lead to one thing.
"A better deal on your mortgage, your personal loan or business loan," he said.
If borrowers have a good credit history - are paying down the mortgage, haven't missed a payment on a car loan and credit cards are under control - they will be able to demand a better deal on their interest rates or be able to shop around.
"Small business owners can spend less on financing costs and more on investment in business growth," he said.
Comprehensive credit reporting will start with the big four banks, which account for 80 per cent of lending to households, and the treasurer expects other credit providers to quickly follow suit.
Online personal loan provider SocietyOne was ahead of the game, announcing this week it was on board from November 1.
"This will empower Australian consumers in a way they haven't been previously," its chief executive Jason Yetton says.
The Customer Owned Banking Association - representing credit unions, building societies and mutual banks - said the new regime has the potential to increase competition because lenders will have more information about consumers.
"Lenders will have capacity to more accurately price credit relative to the risk profile of the borrower," the association's acting CEO Dominic Dunn said.
