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A recent report has highlighted an overwhelming lack of understanding that is particularly concerning in the new Comprehensive Credit Reporting (CCR) environment, with 97% of the 1,000 Australians surveyed revealing they’re not aware of the impact missed credit card repayments have on their credit score.
“There’s clearly a need for more consumer education,” said Poli Konstantinidis, Experian executive GM of credit services and decision analytics for Australia and New Zealand.
“I believe the industry can work together to push for better awareness among consumers on how their credit card repayment habits have an impact on their credit score in the recent move to a positive reporting environment.”
Nearly a fifth (22%) of the respondents indicated they did not realise credit card repayments could impact future credit applications, while 42% believed one missed credit card repayment would only decrease their credit score by 1%-5%.
However, recent analysis from Experian of more than 90% of open credit card accounts in Australia showed that credit scores will drop by 22% following just one missed credit card repayment in the last three months. This increases to 26% with two missed repayments and jumps to 42% for three or more in the last three months.
“With banks now utilising comprehensive data to inform their lending decisions, and the breadth of this data set to expand in the coming 12 to 18 months, the way you use your credit cards impacts your credit,” explained Konstantinidis.
“It is crucial now more than ever, that Australians are aware of how their credit card repayment habits may affect their credit score. One missed credit card repayment may seem insignificant; however, it has great potential to impact applications for credit.”
