The largest consumer group in Australia are millennials, which make up about a quarter of the population. Their growing incomes and the desire to purchase more expensive items have made them a driving force in marketing, advertising, and sales.
Yet despite being in a position to be financially independent and be able to make preparations for future investments, millennials have very limited knowledge or understanding of what a credit report is and how this could make a significant difference when it comes to loan applications for housing, automobiles, and a start-up business.
The Special Relationship Between Millennials and Debt
Millennials may seem to have it easy but upon closer inspection, they are the generation with the most debt. Born between the years 1982-2002, the number of millennials have greatly surpassed another larger (albeit older) generation – the baby boomers. But millennials have a lot on their plate — at least in terms of debt.
It’s millenials that experienced higher student loan debt, an overused credit card for luxury purchases they don’t really need, and very little savings in the bank. What is surprising (and alarming) is that very few know or realise that such financial information can easily be tracked in their personal credit history.
Based on a recent study, as much 64% of millennials don’t know or haven’t heard of the term “credit report” and around 73% have no idea about the changes made in the Comprehensive Credit Reporting (CCR), a recorded history of one’s ability to be able to pay back debt, a more detailed credit history, all of which will be influential in a credit score.
It doesn’t stop there — many of the respondents didn’t know that their credit score could affect future transactions and loans, such as interest rates and how much they can borrow.
Millennials are Learning
While these numbers paint a negative picture on millennials, they ARE willing to learn.
When it was informed to them that applying for credit means fulfilling many of their needs, such as owning a car or a home, and also includes paying for utilities, and that all this information is readily available in their credit history and helps lenders make a decision about future transactions, millennials were keen to learn more about what they can do to improve their chances of landing a better deal and getting lower interest rates.
Many were concerned that they might be missing out on a good deal, and even receiving any financing at all, just because of a bad credit score.
Financial Mistakes To Avoid
In the past, your credit history only included limited information, such as credit applications and any late or non-payment thereof. However, in 2014 CCR changes also stipulated that your credit history now has details about when you made your payments, and which one of those were paid on time, any loans you have already paid in full, and all open credit accounts.
Such information may seem a lot, and it may sound daunting that such information can be readily available to lenders, but it can also be beneficial to those who want to improve their credit score.
Here are mistakes you should avoid making, and simple solutions to making your credit score better:
Mistake: Missing payments or paying late
Solution: Begin by paying it in full, or at least on time
If you have an ongoing loan that you’re still paying off, look into paying it in full to finish it off. If you can’t afford to pay it off just yet, inquire to have your remaining balance divided into more manageable amounts. If you are paying for electricity, internet, and other such services, make it a point to pay on time. This will help remove any negative marks on your credit score.
Mistake: Not getting a copy of your credit file
Solution: Obtain one as soon as possible
Did you know that you can get a copy of your personal credit file? Your credit file shows you your credit history and will let you check if there have been any errors made to your report which could be hurting your chances of getting a loan. You can easily get one through one of Australia’s credit bureaus.
Mistake: Bad payment habits
Solution: Be more responsible
We understand that it can be difficult sometimes to forget a payment or two every now and then, but there are many options to help busy people remember that a bill is due. You can set up your bank account to automatically deduct payments for bills during certain days of the month so you won’t be bothered by such nuances anymore. Remember that the date of payment is also recorded in your credit history and if it indicates that you have been paying on time (or even earlier than the due date) then this will look good on you when you apply for future loans.
Build a Good Credit Score Now
Building a good credit score now is better than doing so later, especially when you have personal plans of owning your own home or buying a car in the future.
Having debt is quite hard to avoid nowadays when there is easy access to credit cards and “buy now, pay later” deals online, but by becoming more proactive and responsible about paying them off on time, you can create a good credit score that will allow you to apply for loans at good interest rates in the coming years.
