Australians struggle to reduce debt as cost of living continues to rise

9 April 2015, Sydney, Australia —Eighty-eight per cent of Australians say day-to-day expenses, rent or mortgage repayments, groceries and bills, are the most common roadblocks to paying down debt, according to new research by Experian, the global information services company.

Experian research also showed 65 per cent of Australians incorrectly believe contributing to superannuation or saving money can have a positive impact on your credit score.

Andy Sheehan, Managing Director of Credit Services at Experian said the figures not only highlight a knowledge gap when it comes to understanding credit worthiness but also the difficulty Australians face in paying down debt as the cost of living continues to rise¹.

“Australians are more reliant on credit now than ever before. The Australian Securities and investment Commission noted recently that the average Australian credit card debt in 2014 was more than 30 per cent higher than the year before,” he said.

“We know that the most effective way to manage credit card debt is to pay it off in full each month however, we also know that many of us are aren’t able to manage our debt in this way². Our research suggests that about 19 per cent of Australians pay only the minimum repayment on their credit card and five per cent of those people prefer to put extra cash in savings instead of paying down their debt.

“How we manage debt has a major impact on our life. While saving is important, it’s also important to make paying down debt one of your priorities,” said Sheehan.

Unsurprisingly, one in three Australians who participated in the survey (33 per cent) said they were nervous about their ability to access and manage credit and according to the research, their concerns are justified. Sheehan explained there is a significant lack of consumer understanding about the behaviours that impact creditworthiness, particularly when it comes to savings and superannuation.

“Australians are too busy ‘getting by’ to worry about their creditworthiness. Our research shows that Australians are alarmingly misinformed when it comes to credit reports. In overseas markets, consumers are more empowered to take charge of their credit profile, actively manage their credit reputation and use it to get a better deal.  In order for this to become the norm here, Australians need to be better informed and more proactive with their credit reputation,” said Sheehan.

The new figures show we still have a long way to go. The research shows that only 23 per cent of Australians actually understand what a credit score is and how it is used by lenders to grant credit.

Sheehan said comprehensive credit reporting was a step in the right direction as it will encourage people to become more aware of their positioning in the credit landscape.

“Comprehensive credit reporting is good news for consumers. The negative credit reporting system doesn’t take good credit behaviour into account. Australians deserve to be recognised for good financial behaviour and this should be reflected in our credit report to enable better deals,” explained Sheehan.

Additional findings from the research show:

• A further 19 per cent of Australians incorrectly believe that having multiple lines of credit open can positively impact their creditworthiness
• 40 per cent of Australians have up to three lines of credit available to them that they use infrequently
• 60 per cent of people said their bank is meeting or exceeding their expectations on providing information about their credit profile, compared to just 45 per cent in February 2014

People should also be aware that they can access their credit reports from Experian for free at any time. It is a good idea for them to do this to help prevent identity theft and confirm the accuracy of their credit history. Consumers looking to receive a copy of their free credit report and score can do so by visiting the Experian Credit Services website: http://www.experian.com.au/credit-services/credit-services.html or for general service enquiries consumers may call Experian Credit Services on 1300 783 684.

Notes to editors:

Experian commissioned independent research company Pure Profile to conduct an online survey of Australians’ understanding of credit reporting, credit scores and Comprehensive Credit Reporting. The overall sample size was 1000, representative of the Australian population.

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About Experian:

We are the leading global information services company, providing data and analytical tools to our clients around the world. We help businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. We also help people to check their credit report and credit score, and protect against identity theft.  In 2014, we were named by Forbes magazine as one of the ‘World’s Most Innovative Companies’.

We employ approximately 16,000 people in 39 countries and our corporate headquarters are in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil and Melbourne, Australia.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2014, was US$4.8 billion.To find out more about our company, please visit http://www.experianplc.com or watch our documentary, ‘Inside Experian’.

^{1. According to the ABS Selected cost of living index, In the December quarter 2014, the living costs of pensioner and beneficiary households (PBLCI) rose 0.1%. Over the same period, the living costs of self-funded retiree households rose 0.3%, other government transfer recipient households rose 0.2%, employee households rose 0.1%, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/6467.0> 2. Roy Morgan  & The Australian Securities and Investment Commission, 14 March 2014, Media release: ‘Smart People not so smart with their money’, <http://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-041mr-smart-people-not-so-smart-with-their-money/#note3>}