One in 10 Australians has defaulted on a bill payment that led to a mark on their credit file, new research from RateCity has found. And it’s young Australians that are most at risk.
The RateCity consumer study has revealed that 70 percent of defaults occurred before the age of 35, and almost two-thirds (58 percent) had taken place before age 30.
Ali Cassim, money commentator at RateCity.com.au, said the results are worrying and suggest that many young Australians are unaware of the consequences of failing to make a bill payment on time.
“The research has also shown a trend towards a credit-based society as young Australians are taking on debt earlier than previous generations did,” she said.
“More than half of Australians under the age of 35 said they took out a credit card before they turned 25, compared with just 10 percent of baby boomers. We’re certainly seeing a trend to young people and plastic – clearly, a sign of the times.”
One in five Australians who had suffered a default said they still hadn’t recovered financially, and the impact was more severe for young adults, with 25 percent of people aged 18 to 24 saying they still hadn’t found their feet financially.
“What we’re seeing is that Australians who have had a financial blip are really struggling to overcome that, and, in many cases went on to further financial difficulty as a result,” said Cassim.
“Half of the people we spoke to said that a default had led to further money troubles, and again the 18 to 24 year olds were the most affected with three-quarters saying they suffered further financially.”
RateCity’s tips for people facing financial troubles:
- Avoid missing future bill payments by setting up a direct debit to be automatically transferred from your account before the bill payment is due. Set the transfer date for a few days after your salary is paid into your account to avoid any payment delays, etc.
- Be aware of recent changes to credit reporting rules and how a missed payment can negatively impact your credit file – more details are now available to future creditors to access your details to determine whether you’re a worthy candidate for a loan or even a mobile phone contract.
- On the other hand, the new credit reporting rules also give Australians greater opportunity to take steps to add positive marks – green ticks – to their credit file through good credit behaviours, such as making future payments on time.
- If facing a potential default, contact your credit provider / bank / institution immediately to discuss your options – typically they will have ways to assist.
- Give yourself a financial health check – take this time to compare your credit card and other products online using a free comparison site such as RateCity to ensure you’re getting a good deal. Look at the interest rate, fees and the features most suited to your needs.