Australians have wisely adapted their financial behaviour, says Experian
Australia’s credit scores have held steady despite recent economic pressures, with new data from Experian revealing a slight jump in average credit scores during 2022.
The primary driver of this 0.4% increase was Australians within the 18-24 and 25-34 age groups as average scores for both demographics rose by 0.7%.
Meanwhile, Australians aged over 65 recorded no change in average scores throughout the year.
“Credit scores fared surprisingly well in 2022 as Australians faced record-high inflation and increasing interest rates and cost of living,” Experian’s director of client advisory Charlotte Rankin (pictured above) said, referring to the data contained in Experian’s Risk Radar report, released in December.
According to Rankin, the fact that average credit scores were maintained at a time of economic volatility indicated that Australians were able to “wisely adapt their financial behaviours”.
“Australians were [also] able to draw on increased savings accumulated through lockdowns, with Commonwealth Bank data showing the median savings balance was 42% higher than pre-pandemic in February 2022,” she said.
While average credit scores have remained largely unmoved by high inflation and climbing interest rates, Rankin also noted that “economic challenges show no sign of slowing in 2023” and cautioned consumers struggling with repayments to reach out to their bank or lender.
“Proactive and early conversations can make a huge impact on the long-term outcome and the hardship framework was introduced to ensure consumer protections in these circumstances,” she said.
Risk experts surveyed for Experian’s 2022 Risk Radar Report unanimously agreed that customers will likely experience increased levels of hardship and defaults in the next 12 months. The majority of these experts (83%) also agreed that the operating environment has seen higher risk factors for consumer defaults.
“The good news is that hardship regulation introduced in July 2022 means that a framework is in place to manage the increased rates of hardship expected for the year ahead, while also safeguarding against any financial hardship arrangements impacting credit scores,” Rankin said.
