Aussies in the dark on credit scores, research finds
MOST consumers are misinformed when it comes to knowing what banks look for in a borrower. And research shows it could be costing us a bundle.
AUSTRALIANS are misinformed about what affects their credit score, with a significant number mistakenly focused on tax, bank balances and salary, research has found.
The Finder.com.au survey of 2033 people revealed more than a third of Australians are worried late tax payments negatively affected their credit score. This is not the case, meaning people may be focusing on the wrong aspects of their finances, Finder.com.au spokeswoman Bessie Hassan said.
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“Busting credit score myths … is critical especially if you’re considering taking out a loan,” Ms Hassan said, “because lenders use your credit score to determine your borrowing capacity.”
Another 27 per cent mistakenly believed a 10-year-old missed credit card repayment would be taken into account by banks and 23 per cent worried about their salary, which affected serviceability calculations, but not a credit file.
“Lenders look at indicators such as loan repayments and credit card repayments,” Ms Hassan said, explaining that late credit card payments stayed on someone’s record for two years, defaults less than $150 for five years and infringements of more than $150 for seven years.
People’s bank balances (16 per cent), checking credit scores (12 per cent) and postcode (8 per cent) were other notable things that people wrongly believed affect credit scores.
On the flip side, only 23 per cent correctly believed their credit card limit affected their score and 15 per cent that their partner’s credit score affected their own.
“It is near impossible to make changes if you do not know what you need to change,” Ms Hassan said. “Depending on your credit score, knowing may either give you the peace of mind you need, or the wake-up call you need.”
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Being educated can be the difference between getting a home loan and being rejected, according to JJ Taylor, director of property firm @realty.
“Banks are becoming a lot more selective,” Mr Taylor said. “Credit card spending habits are one of the biggest things … If you’re preparing to apply for a home loan, review your own spending habits and make sure you’re not spending outside your means.”