A study on generational trends in credit activity over the past ten years put out by credit reporting agency Veda Advantage reveals that the rate of default amongst the older generation (65 years and above) has increased a staggering 200% over the past ten years. We look at why this could be occurring and the possible ramifications of bad credit history for this age group.
By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.
Veda’s study results, released on June 1 in a report titled: New data from Veda shows surprising differences in credit activity between generations reveals this age group have become more reliant on credit which has led to the increased level of defaults as some struggle to meet financial obligations.
This topic was explored further by the Herald Sun in its article Bad debt increases among over-65s. It reports Veda general manager of consumer risk Angus Luffman saying 6 per cent of over-65s had more debt this year than last year. He said most debts related to living costs such as utility and telecommunications accounts.
Here is an excerpt from that story:
Financial counsellors said yesterday people could find it difficult to reduce their spending when they reached retirement and the supply of easy credit was a major problem.
“After retirement, some people find that their incomes have decreased but their credit card limits can be quite high,” Financial Counselling Australia chief executive Fiona Guthrie said.
“The adjustment can be hard (and) many older Australian are simply poor.
“They may be using credit to simply make ends meet.
“It is also frustrating to hear that industry still tries to sheet the blame home to consumers for what in fact has been the irresponsible marketing.”
It is a worrying trend that older Australians are having to rely on credit to simply make ends meet. The reasons for the increase in the rate of defaults could be simply these age groups not having the necessary funds to meet their repayments, or as speculated by Angus Luffman, it could also be due to a lack of education around credit.
In Veda’s report, Mr Luffman said that education is needed within all age groups on the risks of being enticed into credit as a result of factors like low introductory interest rates.
“The fact is that consumers of all ages still fail to realise that missed monthly mobile phone, utilities, and credit card or loan repayments can all affect their credit rating. It is vitally important that consumers consider and understand the difficulties they could face when they take on credit commitments that they can’t meet,” said Luffman.
We assume that the over 65’s have it all worked out financially. This report debunks that and shows that bad credit history can occur at any age group, and can be as much a result of a lack of education about credit obligations as it can be about not having the necessary funds to meet those obligations.
I always maintain that there is a lack of education about consumer rights and responsibilities around accessing and repaying credit and likewise in addressing credit listing complaints. Credit reporting law is hugely legislated and Privacy Principles cross a number of different codes of conduct for different industries. The difficulty for ordinary consumers in understanding these laws is reflected in a) the number of consumer defaults and b) the volume of consumers seeking credit rating repair services to fix their bad credit.
More education would go a long way in preventing the rate of default in the first place. It would also allow consumers to understand their rights within credit reporting law. Many are unsure what to do if they find themselves with a credit listing which they believe should not be there, and when they try to address the issue with the Creditor, they can be left no better off.
Perhaps older Australians are the most uneducated generation on their rights and responsibilities around credit. This generation is traditionally the ‘saving’ generation – most would have used very little credit in their younger years and the trend towards credit in society today has possibly pushed them into a realm they may be ill-equipped for. A meagre pension propped up by small levels of Superannuation for this generation can also be a contributing factor.
Direct debit problems, bill disputes, divorce or separation issues, even identity theft can all lead to an unncecessary bad credit rating and can be a problem for any generation. And what about those grey nomads tripping around Australia – what if people have failed to tie up all loose ends and have left a bill unpaid or unsettled? In reality, an overdue account will lead to bad credit. They could be listed with a Default and have 5 years of bad credit. If the Creditor can’t get hold of them – they will have a Clearout listing against their name – that’s 7 years of bad credit.
So what can people do if they find this happens to them?
Consumers should address credit listing complaints straight away. What they shouldn’t do is wait 5 or 7 years if the listing should not be there. The best chance of getting that bad credit history removed is for people to contact a credit rating repairer and put their circumstances to them, so it can be established whether they are a suitable candidate. There are some cases of bad credit which cannot be removed. But if there are inconsistencies, there is a good chance that a credit repairer can help them with their case for removal of the credit listing.
And for older generations who want or need to use credit, there is no time to waste on bad credit history that shouldn’t be there.