More than 2.3 million Australians are at risk of financial trouble in 2014. If the situation goes unattended then over half of these people would face high credit issues.
— More than 2.3 million Australians are at risk of financial strife in the next year, with 628,000 at high risk of credit default from something as simple as an unpaid bill, credit card or loan, according to credit bureau Veda.
Veda credit file have a scoring system between 0 and 1200 which summarises information available on a person's credit file, with a higher score indicating a person has better credit worthiness.
While the national average score is 749 there are pockets of extreme risk. QLD, NT and NSW fall below the national average, being home to the lowest average scores and having proportionally more high-risk residents. The lowest average scores are found in cities rather than in rural areas.
Gen Ys lead the pack for credit default risk (23%), over Gen Xers (16%) and Baby Boomers (8%); which is concerning when Gen Ys are those most likely to seek credit in the future for a home, car or big household purchases.
Veda's marketing manager Belinda Diprose said many Australians don't know what is on their credit report and that certain types of information can stay on a person's credit report for up to five years.
The information on a person's credit report is used by telcos, utilities and lenders like banks when assessing credit applications, she said.
Like most loan providers, the Fair Loans Foundation looks at a person's credit history to assess whether they are eligible for a personal loan. Where it differs is that this assessment is done by a credit officer who looks at each person's credit file on a case by case basis. Most mainstream financial institutions analyse the credit history by using software - this means that the person does not receive personal treatment which takes into account many contributing factors.
In early 2008 Fair Loans (formerly Money Fast) began working with the National Australia Bank on the Small Loans Pilot. The aim of the Pilot was to share resources in an effort to better understand the small loans industry and expose predatory practices.
In May 2010 NAB published a report which outlined the findings during the course of the pilot.
The report showed that many individuals were excluded from mainstream finance due to bankruptcy or defaults on their credit file. In some cases their credit file revealed that they had been defaulted for an unpaid bill for as little as $100.
Veda has found "that about 80% of people have never accessed their credit report, almost half (47%) of people think overdue community bills, such as library and video store bills are recorded, and over a quarter of people (26%) of people think speeding tickets are recorded on their credit report,” Ms Diprose said.
“Alarmingly almost a third of consumers don’t realise that all credit applications are recorded as part of their credit history – even if they are not successful or don’t accept the loan offers. Having a number of applications can signal financial stress and may lead to a credit provider declining a credit application.”
Release ID: 25121