‘Want it now’ Gen Ys feel the greatest credit default pain
Sydney, Australia, 25 February 2013: They're young, ambitious and have big financial goals but, according to new analysis of Veda credit data, Gen Ys are carrying an increasing share (60%) of all credit defaults, up 5.3% over the past three years.
Veda, Asia Pacific's leading provider of consumer and commercial data intelligence and insights, reports Gen Y has the lion's share of defaults across all account types - telecommunications, credit cards, utilities and personal loans. The biggest pain is telco bills - with Gen Y responsible for 62% of these kinds of defaults, compared to Baby Boomers (13%) and Gen X (22%), according to Equifax's three-year analysis.
Veda Marketing Manager Belinda Diprose said that while it might not be a surprise that Gen Ys were responsible for the majority of defaults, it was a worrying trend for a group that purported to be ambitious about their career and lifestyle.
'Our quantitative research* has told us that younger Gen Ys are part of a group of Australians who are financially active. They're independent, have a good job and don't mind taking a risk, buying what they want, not just what they need. Usually, they'll have more than one credit card and undertake lots of financial activity," Ms Diprose said.
"But the irony is that this group has big financial goals - a car, travel and education - decisions they know might require access to credit. The fact that a poor credit history might stop them reaching their goals doesn't factor in their thinking."
Ms Diprose said that typically when people got their first credit card, personal loan, or signed up for utilities or telcos, they were focussed on getting what they wanted, not on the consequences. But she said a few simple rules could guide people in managing their credit history.
"Making a concerted effort to pay your bills on time is a good practice to get into. If a credit card bill, personal loan payment, or hire purchase payment goes unpaid, it can have a negative impact on your credit history, and might affect your chances of getting credit down the track," she said.
She said share houses were a problem area, as the unwary often got caught with their names on bills long after they'd moved out. "Carefree is what you want when you move in with mates, but in reality once you're paying household bills, you've got a responsibility. If you move out and your mates don't, change the bills out of your name. You'd be surprised how many people forget. It can make for a nasty surprise on your credit record if a bill in your name goes unpaid."
VEDA'S 5 TIPS TO AVOID PAIN OF CREDIT DEFAULTS:
- Pay your bills on time - paying your personal loan, credit cards and utility bills on time does matter.
- Know what you're getting into - Read the fine print when signing up for anything financial, like a hire purchase agreement, which are popular for big ticket items like furniture or TVs. These agreements can have 'interest free' periods - understand the repayments and the consequences of not repaying within the required time.
- Take responsibility for your own bills - especially if you're in a share house and your name is on the utilities bills. Don't assume someone else will take care of it.
- If you move out, take your name off the bill - even if it causes short term pain for your mates.
- Keep track of your credit record - to check what you're credit history looks like and to get alerts on any changes made to your credit file, go to: www.mycreditfile.com.au. This helps you proactively manage your personal credit finance and may reduce the risk of being denied credit in future.