While almost 80 per cent of Australians think that owning a home is the biggest goal for achieving financial success, a majority aren’t aware of the important role a credit score plays in ensuring they can secure their future property.
A recent Credit Card Compare survey has found that despite four in five Australians considering themselves to be good with finance, nearly 60 per cent (58 per cent) are not aware of their credit actions, or the role a credit score plays for an individual’s borrowing power.
According to the survey, such a gap in awareness and knowledge puts Australians at risk of “borrower’s remorse”.
This is because they are “largely unaware of the way in which credit actions affect their financial position, and how building credit now can help their borrowing power in later life".
According to Indigo Finance’s credit and lending adviser, Melanie Cunliffe, a big barrier to borrowing for Australians is “a misunderstanding of the important role credit plays in the way they are assessed”.
“Australians think they are doing everything right – building savings, paying phone bills on time, tightening up on their budgets or even avoiding store-bought coffees for instance,” she outlined.
“But there is a disconnect, because the reality is, it’s often not until people visit the mortgage broker or bank that they realise there are some simple additional steps they should have considered,” Ms Cunliffe continued.
The adviser said that “chief among these is understanding early the role of having a good credit score and how this can affect your financial future”.
“The reality is that credit files are confusing,” Ms Cunliffe stated.
“Australians don’t understand that it is more than just credit card data that is filed, with lay-by services and interest-free facilities also affecting a credit score.”
She pointed to the research which indicated that more than half of respondents reflected that if they knew having a strong credit score would improve their borrowing power in the future, they would have managed their approach to credit differently.
What is a credit score?
Credit Card Compare’s research found that only half of the Australian population knows what a credit score is and how they can check their individual score.
Nest Egg has compiled a handy guide on credit scores.
Commenting on the statistic, the comparison site’s CEO, David Boyd, said, “Checking your credit score is actually far easier than most people realise, with a simple and free online tool helping Australians quickly understand their financial position and future borrowing power.”
He also showed concern for the research, revealing that “less than one in 10 Australians are monitoring their credit score, which is worrying considering the direct impact that a credit score has on the financial security and future of individuals”.
“We are urging all Australians to connect with the importance of their credit score and do whatever they need to do to ensure they understand it and are making positive choices around it to inform their ability to realise their financial and life goals in the future,” Mr Boyd concluded.
For Ms Cunliffe, “It’s never been more important to ensure you fully understand how you can impact your future borrowing power through your everyday actions.”
Nest Egg has previously reported on the impact that late payments may have on an individual’s credit score.
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We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians
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