Are you a blue collar worker in your earlier thirties or late forties living in outer suburban areas or regional Australia? If you tick these boxes, pay close attention.
Our latest research into the impact of increased data sharing by lenders following the introduction of comprehensive credit reporting (CCR) reveals that “Aussie battlers” are now among the highest credit risk groups in the country.
This is due to the data showing 7% of young blue-collar workers* have missed a credit card payment in the past three months – twice as likely than Australia’s most affluent group of borrowers (3.4%) – jumping to 9.5% when the past six months of data are considered.
The overall findings, based on the analysis of 9.4 million individual credit card holders and 14 million open credit cards in our credit bureau, show CCR is already having a big impact on everyday Australians, with banks now informing their lending decisions with comprehensive data – such as how well someone pays back a loan, keeps up with credit card repayment and how much debt they are in.
CCR positives for blue collar families
However, despite being among those at most credit risk, we have additionally found the vast majority of Aussie battlers are also benefitting from CCR coming into play with many experiencing a boost to their credit worthiness rating. Most blue-collar families* living in mining towns, outer city suburbs and regional Australia are seeing a 3.9% boost to their credit scores, while younger blue-collar workers renting far outside city centres are enjoying a 3.8% jump (the national average is a 2.6% increase).
This means those consistently struggling to make their credit repayments are more easily identified under CCR and can be protected from getting into unmanageable levels of debt, while those with good credit behaviours are rewarded with an increase in their credit score making borrowing easier for these individuals.
With CCR now in full swing, it’s so important for Australians to keep a close eye on their financial situation. As the system matures, lenders are increasingly able to get a 360-degree view of a person’s financial standing – from the credit card limit to whether they have been timely with loan repayments. But it is also up to consumers to make wise decisions with newfound credit opportunities
What can you do to improve your scores?
Our Know The Score research worryingly showed that 65% of Aussies have never checked their credit score. By taking the first step and obtaining a credit report, consumers can check if there have been any changes to their credit scores and use this information to their advantage in conversations with their banks. Other tips to help improve your credit risk are:
1. Apply for and open new credit accounts only as needed
Opening credit accounts for ease of account separation or just to have a better credit mix probably won’t improve your credit score. In fact, Experian’s data shows that having more credit cards leads to unnecessary credit and can harm your credit score in multiple ways, from creating too many hard inquiries on your credit report to tempting you to overspend and accumulate debt.
More than a quarter (30.3%) of Australians with 7+ credit cards had one or more late payments in the last three months, while only 4.7% of Australian with a single credit card showed any late payments.
2. Pay your bills on time
Past payment performance is usually considered a good predictor of future performance, so how reliably you pay your bills is an important factor in a lenders’ decision-making process. Late or inaccurate payments can lower your credit score, so you’ll want to pay your bills on time to positively impact this credit scoring factor. Automatic payments or calendar reminders can help ensure you’re on time.
3. Dispute report inaccuracies immediately
Incorrect information on any credit reports can drag your scores down. Verify that the accounts listed on your reports are correct, and ensure you’re checking your credit reports at all three credit reporting bureaus (such as Experian) for any inaccuracies. If you see errors, dispute the information and get it corrected right away.
A good understanding of your finances is the key to unlocking the full benefits of the recent banking changes. Discover more about credit reports, credit scores and how to look after you credit health in our Education Hub or the industry website CreditSmart, created by the Australian Retail Credit Association (ARCA).
Get your free Experian Credit Report ahead of applying for your loan to get a view of your Experian Credit Score.
* Blue-collar families in the study were typically 45-49 years old with a combined annual household income of $104,00-$155,999, while younger blue-collar workers tended to be between 30-34, bringing in a lower annual household income of $41,600-$64,999.
By Poli Konstantinidis, Executive General Manager of Credit Services & Decision Analytics A/NZ