6 facts about credit scores that most Australians don’t know
From what Australians think a good credit score should get you to the number of people that don't actually know what a credit score is.
When we decided to offer free credit scores on finder.com.au, we wanted to find out what Australians thought about credit scores and how much they understood them. The answers surprised us. So, without further ado, here are some of the most unexpected things we learnt about Australians and their credit scores.
More than two thirds of Australians think that you should be rewarded for having a good credit score.
If you have an excellent credit score, that is, a score in the top Equifax score band, you will receive the same credit card and personal loan interest rates from traditional banks and lenders as someone with an average credit score. Don't think that's fair? Neither do 67% of Australians, according to a finder.com.au survey of 2,033 Aussies.
Risk-based pricing is alive and well in America where a good credit score can mean great rates and better products, but the uptake has been much slower in Australia. Currently, only peer-to-peer lenders offer risk-based pricing, but that could just be the start.
Gen Y is the most concerned about their credit score affecting their ability to access credit.
While 1 in 4 Australians (33%) fear that their credit score could stop them from being approved for a loan or a credit card, this number differed greatly by generation. Gen Y is the most worried, with 40% expressing concern that their credit score might inhibit their access to credit. This number dropped below the national average to 31% for gen X and significantly lower to 11% for baby boomers.
A surprising number of people don't know what a credit score is.
We asked people whether they knew what their credit score was and gave them options for why they did or didn't. For people that didn't know their score, 12.3% did not know their score because they did not know what a credit score was. If we look at the gender breakdown, 10% of males and 14% of females don't know what a credit score is. The generational breakdown shows that the worst offenders are baby boomers, with 15% not knowing what a credit score is, while 11% of gen X and 11% of gen Y also don't know.
Australians are pretty cluey about what an average credit score is.
When asked how they would rate an Equifax score of 500, more than two thirds of respondents (67.6%) answered correctly that this score was average. More females (71.1%) than males (64.3%) answered correctly and baby boomers (70.6%) beat out both gen X (67.5%) and gen Y (64.8%).
More than one third of Australians thought a pay rise would improve their credit score.
Don't get us wrong, pay rises are great. However, they will not improve your credit score. When we asked this question, 34% of Australians surveyed mistakenly believed that a pay rise would improve their credit score. Your income is not included in your credit file, only your employment history is.
More than two thirds think that credit card debt can affect your credit score.
While credit card debt isn't a great thing to have, it can't negatively affect your credit score if you make your repayments on time. Your credit card limit is listed on your credit file, but not your balance. In the US, credit card utilisation, or the ratio of your credit card debt to your credit card limit, is one of the five factors that affects how your credit score is calculated, which is why some Australians might think it would be the same here. As your balance isn't noted, only your credit card limit – among other aspects – can affect your credit score.
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