Has job uncertainty, slow wage rises and the mounting cost of living got you focused on saving and paying down your debts? This is a trend seen amongst more and more Aussies this year. We’re cutting up our credit cards and replacing them with debit cards. We’re choosing personal loans over chunks of credit card debt and we’re choosing to put our plans for a home loan on ice. These are the latest findings from Veda’s Consumer Credit Demand Index for the September quarter. We look at this report, and the projections for credit use and the Australian economy in the future.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.

Veda’s Consumer Credit Demand Index shows a shocking 10 per cent drop in credit card applications in the September quarter – reaching their lowest level in 9 years.

Overall consumer credit demand contracted by 1.4% for the September quarter, continuing Australian consumers’ trend of cautious spending and debt reduction.

Veda’s general manager of consumer risk, Angus Luffman, told the Herald Sun this week there are several reasons why people have moved away from unsecured debt such as credit cards.

“Unsecured credit demand is all about the intention to spend,” he says. “Clearly we’ve had an environment over that period where we’ve seen consumers far more circumspect about spending.

“Also, there is more information now required for a credit card application.”

In their release to the media, Mr Luffman also blames the increasing use of debit cards for the reduction in credit card applications.

“There’s been a 3 per cent growth for the year up to August in debit cards and when you think about the numbers of payments in a year, that means a lot of payments,” he says.

Personal loan applications picked up notably in the September quarter, helped by a notable rise in auto loans which has coincided with a 9% increase in new car sales for the month of September.  The continued growth follows the June quarter which recorded the highest number of auto loan applications since 2007.

Mortgage applications have flat-lined over the past year, despite RBA rate cuts this year.

“We have now seen three quarters of relatively flat mortgage enquiries after two years of decline.   As foreshadowed by the stabilisation in Veda mortgage enquiries in recent quarters, the pace of year-on-year decline in Australian house prices is now easing.  This is expected to continue, but the flat level of mortgage enquiries suggest house price growth will be kept in check over the coming months,” Mr Luffman says.

He says the impact of the Federal Government’s cash handouts has now faded with consumer credit demand decreasing relatively quickly in the September quarter.

“The latest data suggests that lower interest rates are not having an effect on demand for consumer credit.  In the current environment, the short term outlook for consumer spending and credit growth is modest.   As households face increased expenditure, uncertainty around wage growth and levels of unemployment they will continue to be cautious, save and pay down debt.  This trend is likely to continue given the Federal Government’s pull-back on welfare benefits such as the baby bonus and health insurance rebates.”

Whilst we are continuing to save and not spend, banks will continue to hold the reigns tight on lending criteria. It is important for anyone who is focused on saving (whether that be for a home or for the future) to know that a good clean credit history is essential to approval for any credit. If you are not applying for credit as regularly as you were, you should request a free annual copy of your credit report. This will allow you to stay on top of your credit history and ensure that no mistakes have been made with your credit rating which could see you refused credit for a five year period.

If an account has shown to be more than 60 day in arrears, the Credit Provider can list your credit file with a default. Sometimes this occurs by mistake. Sometimes the Credit Provider defaults the wrong credit file, or they don’t notify you before they list the default, or it out and out shouldn’t be on your credit file.

It is up to you to detect these errors – but many people don’t know about them until they apply for credit and are refused.

The benefit of checking your credit report when you don’t need credit is if there are any mistakes or errors on your credit file you have plenty of time to get it corrected.

If you want to know what is being said about you on your credit report, or if you have detected a credit file error that you need to dispute, you can contact MyCRA Credit Rating Repairs on 1300 667 218 or visit our main site for more information www.mycra.com.au.