A lot of people don’t have a clear understanding of how an individual’s credit score is computed. There are even some who do not know the importance and the impact of credit rating on their future financial capacity. An Australian financial company, Experian, conducted a survey on 1000 people and the results showed that a staggering 65% of Australians falsely believe that contributing to superannuation or saving on a retirement fund has a positive effect on their credit report. The report also stated that 33% were not confident in their ability to obtain credit as well as manage its repayment. While only a 23% were confident that they know how they get their credit score and how it directly impacts their ability to access credit facilities, get approved for a loan and how interest rates can be affected by their credit score. Other stats showed 19% of the participants think that having several open lines of credit increases their financial credibility and a surprising 40% don’t know that there are several credit options available to them.
Australians misinformed about their credit score and how it works
The statistics are much too low and it is surprising that only a small percentage of the Australian population are educated on credit rating and how lending companies use the information on their credit score when considering someone for a loan. Andy Sheenan, the managing director of Experian a credit services company stated that according to their research, Australians are alarmingly misinformed about their credit reports. Australians seem to be too busy getting along with their lives to worry about their creditworthiness. According to Sheenan, consumers from overseas markets tend to be more involved in taking charge of their credit profiles and managing their credit scores in order to get better deals. Australian residents need to adopt this kind of behaviour and be more proactive with managing their credit score. Sheenan further explained that this clearly shows a gap in the proliferation of information to help people understand how credit and credit score works.
The amendment in the Privacy Act of 2014 has given lenders access to more financially related information such as previous account open and close dates, credit lines that are active, access and limits to credit facilities and payment history on credit accounts. This is a step in the right direction because with the comprehensive credit reporting Australians can have a chance to use good credit behavior to improve their credit score. People need to have a chance to be recognised for the time that they made payments on time and other good credit behaviours and not just for the times that they were late or unable to pay.