Are Australians paying off their debts? Credit score increases suggest they are

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Credit bureau Experian reports that since the start of the COVID-19 pandemic, there has been a steady increase in average credit scores across all demographic groups in Australia, regardless of age or gender.

Calculated using personal and financial information (like how much money you’ve borrowed or whether you’ve paid your bills on time), credit scores typically range from 0 to 1,200 and indicate the level of “risk” that you represent as a borrower. The higher your score, the better. Lenders (such as banks) then use it to determine if you are a safe investment for credit cards or loans.

Between March 2020 and December 2021, Australia’s overall credit ratings increased from 710 to 734 (an increase of 3.4%). If we compare these figures on the scale of “credit rating qualitythis indicates a jump from “good” to “very good”. Earnings like these can dramatically increase people’s chances of successfully applying for credit cards or home loans.

According to Experian, Australians between the ages of 45 and 54 maintained the highest average credit scores, ending at 742 in December 2021. This makes sense, as older people generally represent the safest bet when it comes to credit.

Surprisingly, however, young people – generally considered a credit risk – have seen the biggest increase in their scores during the pandemic. In particular, 18-34 year olds posted a huge average jump of 32 points, or 4.9%. (Older generations, on the other hand, gained only 25 points).

At home and debt consolidation

There has also been a significant increase in credit ratings during the nationwide shutdowns. The fastest rate of improvement was seen from June to October 2021, when the Delta epidemic raged in New South Wales and Victoria.

According to Tristan Taylor, managing director of credit services at Experian, these trends may indicate that Australians have used the pandemic as an opportunity to reassess their spending habits by “battling down the hatches”. With usual outlets such as travel, concerts, and restaurants off the table, consumers are instead taking the opportunity to build stronger credit profiles by paying down their debts.

Young people in particular are “using the COVID-19 lockdowns to reassess their financial goals,” Taylor says. After all, a good credit score can help you get the best deals on credit cards or home loans. If these trends continue, young people could come closer to affording the significant costs of home ownership.

All of this extra attention to financial security and credit ratings shows that Australians are becoming increasingly frugal – at least for now.

If you want to know what your credit score says about you, check out our quick breakdown here. Room for improvement? No worries: we’ve also written guides on how to improve your credit score and avoid common credit pitfalls.

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