MyCRA Specialist Credit Repair Lawyers

Tag: Consumer Credit Expectations Survey

  • It’s not credit for Christmas, says DnB

    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.

     

  • One in four Australians short of cash would default on mortgage

    More struggling Australian families than ever do not expect to manage their existing debt levels in the coming months. The numbers of families expecting to have to default on credit like mortgages, utilities, phone and internet bills in the coming months has increased. One in four Australians would default on their mortgage if they were short of cash. This is a worrying trend, and points to a continued lack of knowledge about the ramifications of defaulting on bill payments. For people who end up with bad credit history, they can potentially enter into a cycle of debt that can take years to recover from.

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

    Alarming statistics have arisen from Dun & Bradstreet’s Consumer Credit Expectations Survey from this month – projecting into the June 2012 quarter.

    Over a third of Australian families will struggle to manage existing debt levels, with nearly half (46%) of low-income households expecting difficulty managing their debt. This represents a rise of eight percentage points since the fourth quarter of 2011, 11 points above the national average.

    Here are some of the statistics coming out of this survey:

    Default expectations

    – Overall, more than one in four (26%) of Australian consumers who are short of funds would forgo a mortgage payment.

    – Of those families that do find themselves short of cash in the coming months, more than one in ten (12%) would default on a mortgage repayment or internet bill. Fourteen per cent of families would choose to default on their pay television account.

    – Nearly one in five (19%) low-income households would sacrifice an electricity bill, three percentage points above the national average.  While six per cent would forgo a mortgage repayment.

    – An increasing number of young Australians also plan to default on mortgage repayments if short of cash. The survey also found 18 per cent of 25-34 year-olds said this would be the first bill to be sacrificed during low cash flow periods. This also increased noticeably among West Australian (up 13 points to 20%) and Victorian (up six points to 11 per cent) consumers.

    Credit use expectations

    – Number of consumers planning to use redraw facilities on their mortgage to make a major purchase was up four percentage points year-on-year to 22 per cent.

    – 41 per cent of Australian households with children will be forced to rely on a credit card to cover living expenses, up two percent since late last year.

    – A growing number of households earning less than $50,000 a year are planning to use credit to cover costs (41%), up from 37 per cent in the December quarter 2011.

    – However, 27 per cent of families plan to apply for new credit or a limit increase during the June quarter.

    According to Dun & Bradstreet’s CEO, Gareth Jones, the survey results indicate a worrying cycle of debt accumulation and dependency among struggling consumers.

    “Nearly one-in-three low-income households expect rising household debt levels, but with limited ability to pay this down. When consumers are increasingly forced to accumulate debt they are unable to manage, just to keep the family finances afloat, this has the potential to quickly become a vicious cycle,” Mr Jones said…

    “Before consumers apply for more credit they should assess whether or not they can afford to repay the funds and check their credit report to ensure there are no black marks listed on their file that could make it harder or more expensive to get credit,” he said.

    These statistics show that we are just not doing enough to educate large groups of the Australian population on the ramifications of increasing debt, and the importance of meeting credit commitments. Unfortunately, we can’t do anything about the rising cost of living for them, but we can help people prioritise. There needs to be a major shift in the Australian psyche about all credit and a major education campaign on managing debt. I think if we don’t want to end up with some kind of credit crisis in Australia – it is essential.

    Gareth Jones puts it finely when he makes the point about how consumers view bill payments:

    “Consumers tend to view non-core expenditure such as phone or internet bills as dispensable, however the damage to an individual’s credit history can be an issue irrespective of the type of account defaulted on. The default will stay on a credit report for five years and can severely limit a consumer’s ability to access affordable, mainstream credit in the future,” Mr Jones said.

    The ramifications of overdue accounts

    Any credit commitment which is more than 60 days in arrears – whether that is a mortgage, a credit card or a phone bill – is considered an overdue account, and a creditor will list this overdue account on the consumer’s credit file as a default.

    A default on a credit file is considered a ‘bad credit rating’ by all major lenders, as well as phone and utilities companies.

    The consequences of a consumer having a default on their credit file is refusal of applications for credit through most mainstream lenders for 5 years from the date the default is listed on the consumer’s credit file. The consumer is then forced to either seek alternative credit – often at sky-high interest rates, or do without credit for 5 years.

    We worked out consumers with defaults on their credit file or a bad credit rating will be hit with a whopping average $15,046.57 or more in additional home loan repayments over the first three years of their loan (this calculation is based on a home loan of $300,000 over 30 years on non-conforming loan interest rate of 9.5% vs standard variable rate of 7%).

    What this could mean for Australian consumers

    If, as the Dun & Bradstreet Consumer Credit Expectations Survey predicts, the number of Australians who say they have to use credit to pay down debts is increasing – and the number of Australians who say they may default on credit is also increasing – we could see more and more people thrown into a cycle of having to find alternative credit sources at high interest rates as the only means of paying down debts. Or alternatively we could see a higher rate of bad credit history – defaults, Court proceedings and Bankruptcies across the board in Australia.

    When a consumer seeks credit rating repair, often times they have been uneducated on how they should have handled their difficult circumstances and particularly financial hardship, prior to the default being issued on their credit file. In this instance I believe the job of a credit rating repairer can be two-fold, in one instance we are repairing the credit rating, and in the second we are educating those consumers on what the correct procedure should have been when faced with that scenario.

    If more and more people are in crisis,  then the finance industry, credit industry and government as a whole need to tell struggling consumers about their options for managing debt.

    Consumers need to know throwing away their financial futures by defaulting on repayments is the last option, not the first when they are struggling with their debts.

    For more information on obtaining and managing credit, or for information on clearing credit rating inconsistencies through credit rating repair, contact MyCRA Credit Rating Repairs tollfree on 1300 667 218 or visit our website www.mycra.com.au.

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