New survey: Aussies think a blue-chip credit score should come with perks
- 67% of Aussies think a good credit score should lead to discounts, like in the U.S
- Generation Y are the biggest fans of credit score-related rewards
- How to understand and improve your credit score
11 August, 2016, Sydney, Australia – The higher your credit score, the more you should be rewarded with competitive interest rates when applying for financial products, according to a new survey by finder.com.au, Australia’s most visited comparison website1, however risked-based pricing could marginalise low income or single income households.
The survey of 2,033 Australians found that 67% of Australians think a good financial history ought to mean cheaper interest rates on products like loans and credit cards.
The research also found that more men (70%) believe in rewarding those with a good credit score, compared to women (65%).
Just one in three people think everybody should receive the same rate regardless of their credit score.
Bessie Hassan, Money Expert at finder.com.au, says many hardworking Australians want to be rewarded for a good credit score, much like borrowers are in the United States.
“The general view is that if you save money on car insurance by having a clean driving record, why shouldn’t it be the same for your financial products?
“Your credit score allows lenders to determine your risk profile when they lend money to you. Related to your credit file or your credit history, your credit score is a number that generally ranges between 0 and 1,200 that sums up your financial history and the risk you pose to a lender. The higher your score, the more likely you are to be approved for finance.
“Rewarding those with a good credit score could promote better financial management by Australians. It may give borrowers incentive to keep up to date with their repayments and bills,” Ms Hassan says.
Interestingly, Generation Y (74%) were most in favour of financial products being more heavily weighted to an applicant's credit score, compared to Baby Boomers (66%) and Gen X (65%).
“This is surprising as typically younger generations haven’t built up a credit history yet or have less experience with making repayments, so in theory, it could be difficult for them to access more competitive rates under a risk-based pricing system.”
While those with a good track record may be rewarded with more competitive interest rates when they apply for finance, the reverse is also true for those borrowers that may be penalised for having a bad credit score.
“A national risk-based pricing system may hurt borrowers that already struggle to meet their repayments which would make it more difficult for them to service ongoing debt, such as a mortgage.
“In a sense, risked-based pricing could discriminate against younger borrowers, as well as low-income earners and elderly borrowers such as pensioners,” Ms Hassan says.
To be a responsible borrower, you should take steps to understand how your credit score works. Typically your personal information, defaults and credit inquiries are listed on your credit report and this is used to calculate your credit score and your ability to make repayments.
You can access your credit score through credit reporting bureaus, but keep in mind that you may need to wait 10 days to receive the report. Alternatively, you can pay an additional fee to have the report sent to you within 24 hours, depending on the reporting agency.
State by state breakdown
- ACT and South Australian residents are the least interested in rewarding Australians with good credit scores (36% of respondents from both states think it’s not a good idea).
- More than seven out of 10 (71%) New South Wales respondents think a good credit score should benefit consumers.
- Queenslanders were in second place with 69% agreeing that good credits scores should equal borrowing discounts.
- Generation Y (74%) respondents were biggest supporters of there being interest rate discounts for a clean credit history
- Baby Boomers and Gen X were on par when deciding whether the criteria of financial products should be more heavily weighted to your credit score, with 66% and 65% of respondents supporting this, respectively.
How to improve your credit score
Accessing your credit score can help you understand your financial position so you can make actionable changes before you apply for finance.
- Check for high-risk listings. Once you have your credit file on hand, keep an eye out for high-risk listings such as high credit card limits or bad credit listings such as defaults or infringements.
- Identify areas for improvement. After reviewing your credit file and your credit score, take measures to improve your financial health. For instance, if you have several personal loan or credit card accounts, consider consolidating your debt into one manageable repayment.
- Don’t go overboard with applications. Making multiple credit applications in a short period of time can negatively affect your credit score. This is because lenders will see several enquiries on your file, and because they can’t view the outcome of the enquiry, they may assume that you have been rejected for a series of applications which will raise a red flag.
- Regularly review your credit score. Get into a habit of frequently checking your credit score to make sure that all information listed is correct, and to identify how you can improve your financial wellbeing.
For further information
The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
finder.com.au is Australia's most visited comparison website and has helped over 4.8 million Australians find better credit cards, home loans, life insurance, shopping deals and more since 2006. finder.com.au compares 250 credit and debit cards from 31 providers, over 300 home loan products, and information from 13 life insurance providers as well as online shopping promo codes, mobile phone plans, travel insurance and more. One Australian every five minutes is using finder.com.au to find better (Source: Google Analytics).