Aussies paying off their debts? Credit score increases suggest they are
Credit bureau Experian reports that since the onset of the COVID-19 pandemic, there has been a steady increase in average credit scores across every demographic in Australia – regardless of age or gender.
Calculated using personal and financial information (like how much money you’ve borrowed, or whether you’ve paid your bills on time), credit scores generally fall between 0-1,200 and indicate the level of ‘risk’ you represent as a borrower. The higher your score, the better. Lenders (such as banks) then use it to determine if you are a safe investment for credit cards or loans.
Between March 2020 and December 2021, overall credit scores in Australia improved from 710 to 734 (an increase of 3.4%). If we compare these numbers on the scale of “credit score goodness”, this indicates a jump from “good” to “very good”. Gains like these can significantly help people’s chances at successfully applying for credit cards or home loans.
According to Experian, Australians aged 45-54 years maintained the highest average credit scores, finishing at 742 in December 2021. This makes sense, as older people typically represent the safest bet when it comes to credit.
Astonishingly, however, young people – usually considered a credit risk – saw the biggest boost in their scores during the pandemic. In particular, 18-34 year olds showed a whopping average jump of 32-points, or 4.9%. (Older generations, on the other hand, only gained 25 points).
At home and consolidating debts
There was also a significant spike in credit scores during national lockdowns. The fastest rate of improvement was seen throughout June - October 2021, when the delta outbreak raged in NSW and Victoria.
According to Tristan Taylor, the general manager of credit services at Experian, these trends may indicate that Australians have used the pandemic as an opportunity to reevaluate their spending habits by “battening down the hatches”. With usual outlets such as travel, concerts, and restaurants off the table, consumers are instead taking the opportunity to build stronger credit profiles by paying off debts.
Young people in particular are “using COVID-19 lockdowns to reassess their financial goals,” says Taylor. After all, a good credit score can help you get the best deals on credit cards or home loans. If these trends continue, young people might edge closer to affording the significant costs of home ownership.
All this extra attention on financial security and credit scores shows that Australians are increasingly becoming more frugal – at least for now.
If you’d like to know what your credit score says about you, check out our quick breakdown here. Room for improvement? No worries: we’ve also written some guides on how to improve your credit score and avoid common credit pitfalls.
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