A little late paying those credit card bills? From March, it could cost you more than late fees.

Just one late payment on a credit card bill, house or car loan, even by as little as five days, will soon show up on credit reports of consumers applying for credits cards, mortgages or mobile phone plans.

The new system is being introduced under the Privacy Act, which comes into place on 12 March.

Credit reports are prepared by credit agencies to help potential lenders assess the risk of extending a loan.

Australia currently has a “negative” reporting system which only tells potential lenders about an applicant’s previous loan enquiries and their worst financial behaviour: bankruptcies, insolvencies, loans defaults or loan applications previously rejected.

The reforms will shift Australia to “positive” reporting which tells lenders far more about an applicant, including details of any existing mortgages or personal loans, how quickly old loans were repaid, any loan extensions — and records of any repayments made more than five days late.

While there’s still time to build good bill-paying habits, some financial sins can’t be scrubbed clean: the new laws will apply retrospectively, noting any late repayments made since December 2012.

The Australian Retail Credit Association (ARCA) says the reforms will help financial institutions lend money more securely, and let applicants prove their creditworthiness by showing evidence of existing bills, phone plans and personal loans repaid on time. It has set up a website outlining its case – creditsmart.org.au.

Alexandra Kelly, principal solicitor at NSW’s Consumer Credit Legal Centre, said the changes could be positive for young and new loan applicants, whose credit reports currently show little or no evidence of their reliability.

“But there will also be a groups of people who experience financial hardship, who won’t be aware that if their payments are five days overdue, there will be a notation made in their credit report,” she said. “Their pay could be out of cycle, or out of sync, and they’re not going to be prepared to keep up with repayments. And then you have people who will lose their job, have no savings, and miss a couple of payments. And their credit history will be out of whack.”

“The fear is that we move to an American system, where you have this concept of a credit rating, some sort of score, and people with bad scores get higher interest rates and those with good scores get lower rates.”

She predicts that payday lenders and credit-repair services would “skyrocket in popularity”, among those excluded from credit by the new system.

Financial services ombudsman Philip Field agrees the reforms could lead to American-style “risk-based pricing”, and might be a boon to predatory lenders, but says most financial institutions would take a reasonable view of late repayments.

“I wouldn’t have thought a lender would be too concerned about a missed payment here or there,” he said. “But if there’s a consistent pattern of missed payments then there would be greater concern, as there should be.”

ARCA statistics show that 59% of Australians are not aware of the existence of credit reports.

The reforms were passed in November 2012 under the previous Labor government, and bring Australia into line with OECD standards.

• This article was amended on 19 February 2014. An earlier version said the Australian Retail Credit Association set up a website called smartmoney.org.au.