Christmas credit may not be ‘on the cards’ for shoppers this year. Due to concern about financial security in Australia, it is predicted shoppers will continue to tighten their purse strings over the Christmas period, with less predicted to spend money on non-essential items and credit usage predicted to drop, according to credit reporting agency Dun & Bradstreet.

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

Findings from Dun & Bradstreet’s latest Consumer Credit Expectations Survey, which measures expectations for savings, credit usage, spending and debt performance during the December quarter 2012, show half of Australia’s households are less likely to spend on non-essentials in the coming months.

The survey showed:

• One in three (29%) are more inclined to save than they were 12 months ago.
• 56 per cent of Australians are concerned about their personal financial situation.
• 37 per cent of households less likely to use a credit card to pay for non-essential items over Christmas compared to the same period last year, while just 16 per cent plan to apply for a new credit product or limit increase.

Dun & Bradstreet notes that the Reserve Bank’s decision to lower interest rates due to slower economic growth comes as households reduce debt and increase savings as a buffer against economic instability, including the risk of rising unemployment. The bank is now predicting more moderate and sustainable credit growth off the back of this trend in consumer behaviour.

Dun & Bradstreet General Manager, Danielle Woods, says the conservative consumer outlook could have a significant negative impact on businesses reliant on the Christmas rush.

“An increasing number of Australians are concerned about their financial security and this is weighing heavily on their plans for the Christmas period,” Ms Woods said.

“Prioritising saving over non-essential spending is a positive for the balance sheets of Australian households and the Reserve Bank is certainly encouraging this behaviour, in light of uncertain employment conditions. However, it could have detrimental flow on effects for businesses that are looking to Christmas to drive an uplift in sales.”

However DnB also says, while consumers are planning to avoid non-essential spending and non-essential credit usage during the Christmas period, a significant proportion will need to rely on existing lines of credit to cover the cost of living.

Forty per cent of 35-49 year olds will use credit to cover expenses they couldn’t otherwise afford, up from 35 per cent during the December quarter 2011. In addition, 60 per cent of this demographic are expressing concern over their financial situation and one in three (35%) would last no longer than one month on their current savings without full-time employment.

This survey reveals a similar sentiment from Australian Bureau of Statistics figures released in September this year, showing one in seven Australian households is spending more than it earns, as the working poor struggle with monster mortgages and surging power bills.

“Nearly 8 per cent of the nation’s richest households were living on credit, the Australian Bureau of Statistics reported yesterday.

Of the top 20 per cent of households earning the most money, 3 per cent could not afford to pay a gas, electricity or phone bill on time during 2009-10.

Of the poorest 20 per cent of households, one in five could not pay their bills on time and one in four spent more than they earned”, it was revealed in news.com.au ‘Aussie strugglers living beyond means’.

So it seems the trend is continuing that most people are batting down the hatches and reducing their spending in order to pay down debts – but there are sections of the community who are still struggling due to rising costs of living and over-commitment. This seems apparent regardless of income. So for those people, credit for Christmas may be a reality.

Causes for over-commitment can be a simple inability to manage money – wanting more than they can afford. Or in some cases, over-commitment can be a gradual thing – sometimes caused by expensive credit as a result of bad credit history. There have been reports that possibly as many as 3,000,000 Australians are impacted by bad credit history.

If someone lands with a bad credit rating, it can completely change their financial situation. The black marks placed there by creditors show up on the credit file for 5 years. Bad credit can limit choices and can perpetuate the debt cycle by leading people to choose loans with higher interest rates and more fees, so the struggle to make repayments can be even harder.

If the person with bad credit history wants to try and start again with credit, it may be possible to wipe the slate clean  and remove bad credit history, particularly if it should not be there, or was incorrect in the first place.  If the credit file contains inconsistencies, that person may be a good candidate for credit repair.

A credit repairer can work with creditors on behalf of the client to identify inconsistencies and negotiate to clear the credit file of those defaults, clear-outs, writs and Judgments which contain errors, are unjust or just should not be there. A clear credit rating would give them the financial freedom to use credit whenever they need to at competitive rates.

For advice about credit repair contact a  Credit Repair Advisor on 1300 667 218 or visit MyCRA Credit Rating Repairs website www.mycra.com.au.