While growing Personifi, we have got to know many of our customers really well. Through this experience we have been surprised to learn how little people know about their credit scores. In fact:
40% of millennials do not know what a credit score is.
This means that many Australians are making poor financial decisions, and are damaging their financial health and future prospects, due to a lack of basic financial literacy. Importantly, many Australians do not realise how seemingly inconsequential actions today can change their life down the road.
73% of Australians are unaware of their credit score.
Let’s take an example of our customer Jamie.
2 years ago, Jamie moved houses and forgot to cancel his gas and electricity contracts with his providers - a simple mistake that can happen very easily with the innumerable tasks when moving. However, because of Jamie’s failure to pay these bills when they fell due, he had a default recorded on his credit report.
According to the Equifax credit scoring system, Jamie’s credit score declined from 691 to 504.
So, what does this mean for Jamie next time he wants to take out a loan?
With one simple error, Jamie will be charged an extra $1,584 for his loan. This additional amount could be spent on return flights to Europe, season tickets to the footy for the next 3 years, or furniture for a new house!
What else can you do to ensure you don’t affect your credit score?
- Open the minimum number of credit accounts necessary
- If you do need to open a credit account, make sure you choose a reasonable credit limit (don’t select the maximum if you don’t have to!)
- Only apply for a loan with confidence that it is the best available option (we can help you with that)
- Pay all utility and telecommunication bills on time.
If you ever have any personal finance questions, the experts at Personifi are always your best point of contact. Feel free to reach out to us via email or through our chat!