The comprehensive credit reporting (CCR) is allowing a vast majority of blue collar “Aussie battlers” residing in outer suburban and regional areas to borrow more easily despite being among the highest credit risk group, according to the recently released research of global and information services company Experian.
Based on Experian’s credit bureau data, which analysed 9.4m individual credit card holders and 14m open credit cards, CCR is already creating a “big impact on everyday Australians”.
With banks now revealing their lending decisions with comprehensive data — such as someone’s capacity to pay back a loan or meet credit card payments — those at greater credit risk are becoming more visible to lenders.
Data revealed that young blue-collar workers are among the most likely to miss over three credit card payments, with 7% of the demographic missing a credit card payment in the last three months, compared to only 3.4% of affluent group of borrowers.
A score boost
In a statement, Experian executive general manager of credit services and decisions analytics for A/NZ Poli Konstantinidis said, “CCR is providing lenders with greater transparency into a borrowers’ financial standing.”
“This means rather than demographic groups being assessed collectively, those consistently struggling to make their credit repayments are more easily identified and can be protected from getting into unmanageable levels of debt, while those with good credit behaviours are rewarded with an increase in their credit score,” he added.
While most blue-collar families residing in mining towns, outer city suburbs and regional Australia experience a 3.9% credit score boost, younger blue-collar workers who rent far outside city centres enjoy a 3.8% jump.
Taking in the view
According to Konstantinidis, with CCR in full swing, Australians should closely monitor their financial situation. “As the system matures, lenders are increasingly able to get a 360-degree view of a person’s financial standing - from the credit card limit to whether they have been timely with loan repayments,” he said.
He advises that consumers need to consistently keep track of their credit card payment. If a lapse occurs, they should quickly rectify the situation and make sure they’re continuously updated with future payments, especially now with lenders looking back at credit card activities in the last 24 months.
“By taking the first step and obtaining a credit report, consumers can check if there have been any changes to their credit scores and use this information to their advantage in conversations with their banks,” Konstantinidis said.
Experian’s previous research found that three in five borrowers were unaware credit advisers are looking deeper into their financial history, which could potentially put their next loan application at risk.