Most borrowers are ignorant about how their financial decisions affect their credit score, which could impact on their ability to get a good deal.
Research company Experian surveyed 1,000 people and found that 65 per cent of Australians incorrectly believe that contributing to superannuation or saving money can have a positive impact on their credit score.
Furthermore, 33 per cent of participants said they were nervous about their ability to access and manage credit, while only 23 per cent understand what a credit score is and how it is used by lenders to grant credit.
The survey also found 19 per cent of Australians believe that having multiple lines of credit open can positively impact their credit-worthiness, while 40 per cent have up to three lines of credit available to them that they use infrequently.
Experian managing director of credit services Andy Sheehan said the figures highlight a knowledge gap when it comes to understanding the way credit works.
“Australians are too busy ‘getting by’ to worry about their creditworthiness and our research shows that they are alarmingly misinformed when it comes to credit reports,” Mr Sheehan said.
“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 application,” he said.
Mr Sheehan noted the amendment of the Privacy Act in 2014 to introduce comprehensive credit reporting was a step in the right direction to encourage Australians to become more aware of their position in the credit landscape.
“Comprehensive credit reporting is good news for consumers as the negative credit reporting system doesn’t take good credit behaviour into account,” he said.
“Australians deserve to be recognised for good financial behaviour, and this should be reflected in our credit report to enable better deals.”
As of 12 March last year, lenders have been able to access a list of credit enquiries clients have made in the past including account open and close dates, type of credit accounts still active, the limit of active credit facilities and monthly repayment history on credit accounts.
Meanwhile, 88 per cent of participants cite day-to-day expenses, rent or mortgage repayments, groceries and bills as the most common barriers to paying down debt, according to the survey.
“Our research suggests that about 19 per cent of Australians pay only the minimum repayment on their credit card, and 5 per cent of those people prefer to put extra cash in savings instead of paying down their debt,” Mr Sheehan said.