2.3m Australians at risk of financial trouble in the next year

More than 2.3 million Australians are at risk of financial strife in the next year , with 27% (628,000) at high risk of credit default from something as simple as an unpaid bill, credit card or loan, according to analysis of credit scores, or VedaScores, by credit bureau Veda.

Available to consumers for the first time, the VedaScore is a number between 0 and 1,200 that summarises information on your Veda credit file at a specific point in time. The higher the VedaScore, the better an individual’s credit worthiness.

Belinda Diprose, Veda Marketing Manager, says making the VedaScore available to consumers for the first time makes it easier for Australians to understand and manage their credit profile. This is particularly important for the 15% of credit active Australians (2.3 million) at risk of default in the next year, she says.

While the national average VedaScore is 749 (from a range of 0 to 1,200), there are pockets of extreme risk. QLD, NT and NSW fall below the national average, being home to the lowest average VedaScores and having proportionally more high-risk residents. The lowest average VedaScores 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.

“Many people don’t know what’s on their credit report or that utility and telco applications or defaults may be recorded on their credit file. Lenders like banks, telcos and utilities may use a person’s credit history and VedaScore when assessing credit applications,” she said.

“Certain types of information, like a credit default, can stay on a person’s credit report for up to five years. So even if you’ve got no plans to apply for credit right now, it pays to be aware of your VedaScore so you know where you stand on your credit report held by Veda. This may make all the difference in future when applying for credit for a car, a wedding, a mortgage, or for purchases like furniture or a holiday,” Ms Diprose said.

Veda is the only credit bureau in Australia to offer consumers this credit ranking tool, designed to give Australians more power to improve and manage their credit profile. The VedaScore represents all elements of a person’s credit file.

“If you find out what’s recorded on your credit report, you can check whether it’s accurate and you’ll better understand where you stand if you want to apply for credit. If you have a low VedaScore then you can take steps to try and improve your score. For example, paying off any defaults may be viewed positively by lenders.” 

Veda has also combined its analysis of 300,000 VedaScores with consumer research of 1,000 Australiansii to form the first Veda Australian Credit Scorecardiii, which will offer market leading insights into credit habits and VedaScores year on year.

Ms Diprose says the inaugural Veda Australian Credit Scorecard shows that despite 15% of Australians being at risk of a credit default being recorded on their credit report in the next 12 months, considerable lack of awareness exists about what a credit history is, or how a poor credit report can impact chances of getting credit from lenders.

“The Veda Australian Credit Scorecard 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 your credit application.”

To find out how you score or for more information, go to www.veda.com.au