Aussies urged to take control of their financial future
Equifax encourages consumers to improve their financial literacy
SYDNEY, 2 August 2017 – A New Year brings a flurry of optimism, bold resolutions and a healthy dose of self-reflection. It is timely that Equifax, the global information solutions company and the leading provider of credit information and analytics in Australia and New Zealand, is encouraging Australians to review their fiscal wellbeing, specifically their credit profile, as the new financial year gets underway.
As a nation, it seems Australians have been keen to master a healthy lifestyle, embracing the art of mindfulness, organic eating and yoga, yet many still fail to prioritise their financial health.
Unfortunately, failing to do regular financial health checks can lead to serious consequences. Limited financial literacy and idle attitudes towards personal finance can result in unhealthy debt and poor credit scores, which carry long-term ramifications.
The financial literacy gap
No generation has taken to the holistic health movement quiet like Millennials; however, they’re not leading the pack when it comes to managing their financial wellbeing.
Equifax data shows that 36 per cent of people under the age of 30 admit to overspending. Millennials are also the demographic at highest risk of defaulting in the next 12 months (23 per cent).
While Millennials are often criticised for their instant gratification-seeking lifestyle choices, this financially frivolous behaviour is not entirely rogue – a quarter of all Australians (26 per cent) admit to splashing their cash on things they know they will struggle to repay.
Belinda Diprose, spokesperson for Equifax, said that many Australians simply don’t know where to start when it comes to improving their financial know-how.
“It’s vitally important that people, especially young people, understand their personal credit profile, as it determines qualification for things like future credit cards, loans, a mortgage or a mobile phone contract, and on what terms,” Ms Diprose said.
“Improving financial literacy can seem like an intimidating task for many people, but when you break it down and think of each piece of knowledge as an individual building block, it becomes much more achievable.
“A good place to start is simply understanding what a credit profile is, the information that affects it and, equally as important, the things that don’t,” Ms Diprose added.
What really goes into a credit profile?
A credit profile determines an individual’s credit worthiness; that is, a person’s risk profile based on their financial habits in the past and their ability to repay future debt.
Equifax is the leading custodian of Australians’ credit reports, which are available to all consumers and are built using information provided by recognised credit providers and public record information.
Credit providers include; banks, credit unions, store credit issuers, payday lenders, telecommunication providers and utility providers. Public record information can be sourced from ASIC and the judicial system. All of this information helps to create a footprint of an individual when it comes to credit.
What is not included?
Contrary to popular belief, salary, superannuation and savings are not included in an individual’s credit profile. The same goes for cars, houses, jewellery, age, gender and the number of dependents a person has.
While these items may reflect a certain lifestyle, and can be an indication of net worth, credit bureaus such as Equifax are not provided with, nor allowed to collect, this information to determine credit worthiness.
“Misconceptions around personal credit scores and reports can mean consumers may not be making the best choices when it comes to their credit reputation. Equifax is committed to improving financial literacy across the country to ensure Australians are able to make informed financial choices,” Ms Diprose said
How credit scores are calculated
An Equifax Score is a number anywhere from 0 to 1,200. The higher the number is, the better the score. Equifax Scores are calculated at a point in time based on the underlying data contained in a credit report.
The components of an Equifax Score are broken down into the following: credit application (51 per cent), repayment history (30 per cent), credit limits (3 per cent), adverse events (10 per cent), personal information (3 per cent) and credit report age (3 per cent).
Equifax provides a range of solutions to help consumers manage and protect their credit profile. To access your credit report or credit score visit equifax.com.au or for your free score go to getcreditscore.com.au