Australians are managing cost of living pressures but credit awareness gaps exist  

Melbourne, 23 December 2023: Australians are taking positive steps to manage cost of living pressures but are overlooking key protections that can benefit their credit health, a recent research study conducted by consumer education website CreditSmart has found.

CreditSmart spokesperson and Australian Retail Credit Association CEO Elsa Markula said Australians have been actively looking for better deals, refinancing loans and renegotiating utility expenses over the past six months and despite rising cost pressure, the majority remain confident in their financial situation.

“The data is showing us that Australians are faring better than expected and are being proactive about taking control of their finances given mounting pressures from high inflation and rising interest rates,” Ms Markula said.

“As we’re now in the thick of the festive season, it’s great to see one in three people (33 per cent) are shopping around more and comparing prices, and just under half of people (46 per cent) are telling us they can meet their bills and credit commitments without any difficulty, which is only slightly lower than we found in December 2021 before interest rates began increasing.”

Australians’ overall confidence in their financial situation has also dropped only slightly in the past two years, despite 13 interest rate rises and increasing inflationary pressure during that period. Overall confidence was at 68 per cent in the latest survey compared with 76 per cent in December 2021.

Australians are not looking at their credit reports

While Australians are doing what they can when budgeting, the research showed many people have never looked or accessed their credit reports.

The report found 37 per cent of Australians have never checked their credit report. Millennials are the most likely generation to say they have checked their credit reports in the last 12 months (51 per cent), with men also being more likely to do so than women (43 per cent compared to 35 per cent).

“Australians are being smart about managing their costs and expenses, but the data is telling us that people still don’t understand the importance of knowing what’s in their credit report. Better understanding of your financial situation by reviewing your credit report means that you can take steps to properly take stock of your situation. Being aware of what is on your report, and how your payment behaviour can make a huge difference to your credit health is so critical to taking control of your situation,” Ms Markula said.

“Only 34 per cent of people know that their credit report shows a 24-month breakdown of their account payment history. There’s plenty of information out there from CreditSmart and lenders to help people better understand their credit health and how it affects their financial position.”

Misconceptions remain prominent around financial hardship arrangements

Misconceptions around financial hardship could be preventing consumers from accessing appropriate support when needed. Ms Markula said an emerging issue is people may mistakenly believe that seeking assistance from their lender will negatively impact their credit report and credit score.

‘’A hardship arrangement protects your credit report and credit score compared to falling behind in repayments. It also falls off a credit report after 12 months’’

According to CreditSmart’s research, 21 per cent of Australians needed assistance with their repayments, but never asked for it. Overall, 48 per cent of survey respondents identified that they needed assistance from their lenders, with the number as high as 61 per cent for Millennials.

“If you are experiencing financial hardship, the most important thing you can do is speak to your lender as soon as possible. The earlier you contact your lender, the more options which will exist to help you. Most lenders have programs and arrangements in place, including payment pauses or reductions in repayments, to help you regain financial stability and confidence in your situation.”

CreditSmart is owned by the Australian Retail Credit Association, the industry group that represents banks, financial institutions and credit reporting bodies on credit-related matters in Australia.