Credit management tips for young Australians
Veda Advantage provides credit management tips for young Australians Figures released by Veda Advantage show that 18 to 27 year olds, otherwise known as Gen Y, were responsible for a third of all defaults on credit obligations listed with Veda Advantage in 2006.
According to Veda Advantage, this trend is concerning because young Australians are just entering their credit lifecycles then a disproportionate number are failing on obligations shortly after the contracts are signed.
The study also revealed that Gen Y appetite for credit is increasing. Of the record 3.7m new credit cards applied for by Australians in 2006, almost a third of these applications were from 18 – 27 year-olds.
The number of credit card applications for this age group grew 7.3% in 2006 and personal loan enquiries were up almost 8% from 2005.
Young Australians are comfortable with debt than previous generations. They are enthusiastically using credit to underwrite their active lifestyle from their first mobile phone to an overseas holiday or a new car.
This can open the door to opportunities, including entrepreneurship and asset building from an early age. However as a generation that has not experienced a major economic downturn and is used to getting what they want when they want it, it can be easy to brush off credit obligations.
This can prove costly for business and consumers when these obligations are not met. This high rate of defaults illustrates the need for Gen Y to have a great understanding of the importance of managing credit obligations.
Hughes suggests the following tips for young Australians to keep their credit history clean:
Pay future bills on time, or carefully consider your credit commitments.
Contact the organisation you owe money to if you are having trouble paying. Many organisations are willing to set up a reasonable payment extension system if you talk to them about your situation. It is often the failure to respond to a bill or notify a business of your intention to pay that causes them to proceed to default stage.
Do not make a credit application lightly. Shopping around for credit can reflect badly on your credit history because it can indicate to a financial institution that you are being rejected in your other credit applications. This may lead them to treat you cautiously. Current legislation in place means we can not show the organisation running credit checks whether or not an application was successful. All they can see are the number of applications.
If you think you may have problems paying a mobile phone bill, you should investigate things like pre-paid services.
When making an application for credit, write a monthly budget for the forthcoming twelve months, including living expenses. This budget should have capacity to pay more than the minimum amount necessary in the terms of the credit contract.
It is important to keep your address and other details accurate and up to date: If you have moved and have not notified one of your credit providers about that then they may be sending your notices to the wrong address. It’s the individuals’ responsibility to provide those details to their financial institutions and suppliers etc.
Do check your file. If you think something may be inaccurate, let us know and we can help you sort it out.
Consider a credit alert system, so you are made aware of any changes to your file. That allows you to save valuable time sorting out anything that might be problematic such as a fraudulent use of your identity.
Don’t try to cheat the system when applying for credit. The credit checks are in place for a reason. Do not over extend yourself in the credit area, and do not give false or misleading information in a credit application, it may cause difficulties later on.
What young people may not realise is defaults are registered on a person’s credit file early in their life. Even for an overdue mobile phone bill or credit card payment, the person may have difficulty in the future when securing a loan for a car or a house, even when they are earning a reasonable income.
A credit file is a set of information which relates to the credit history of an individual. It is updated every time a person or commercial entity applies for new credit.
This information is one of the factors that impacts on credit worthiness. Banks, retailers and credit providers use the data, along with the information provided to them, to determine whether to lend you money or not.
6-Jun-2007