Figures released by Veda Advantage show that 18 – 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.
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, according to Erica
Hughes, General Manager Information Services and Solution, at Veda
Advantage.
The study also revealed that “Gen Y’s” appetite for credit is
increasing. Of the record 3.7 million 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 per cent in 2006 and personal loan enquiries were up almost 8
per cent from 2005.
Commenting on the findings, Ms. Hughes said: “Young Australians are
generally more 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 more 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 aren’t met. This high rate of defaults illustrates the need
for Gen Y to have a greater understanding of the importance of managing
credit obligations,” she said.
Ms. 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.
– Don’t 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 potentially being rejected in
your other credit applications. This may lead them to treat you more
cautiously. Current legislation in place means we can’t 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’s important to keep your address and other details accurate
and up to date: If you have moved and haven’t 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. Your can check your credit
file and set up credit alerts by visiting www.mycreditfile.com.au
– 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 – don’t over extend yourself in
the credit area, and don’t 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,” Ms Hughes said.
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.
About “Gen Y”
There is no consensus as to the exact range of birth years that
constitutes “Generation Y”, but for the purpose of this study we have
looked at 18 – 27 year-olds. The majority are children of the baby
boomers and as often referred to as the “echo boom”, because of the
large number of births that began in the late 1970s. In Western
cultures, this generation has been brought up in the age of personal
computers and electronic gadgets. Internet resources such as Google and
Myspace, along with iPods and intense multi-tasking have all defined the
characteristics of “Gen Y”.
About Veda Advantage – www.vedaadvantage.com (ASX:VEA)
The data used in the study is sourced from Veda Advantage’s Australian
consumer credit bureau information. Veda Advantage facilitates credit
reference checks for Australia’s major banks and lenders and underpins
the ability of consumers to exercise choice in relation to consumer
credit products. The vast bulk of applications for consumer credit in
Australia are checked against the 14 million personal credit history
files held by Veda Advantage.
