Analysis of average credit score data between January and October 2022 reveals that Australia’s average credit scores slightly increased (0.4%) during 2022*, despite contending with a challenging economic environment as the consumer price index climbed 7.3% and interest rates rose 3% over the same period.

The data also revealed that the biggest rate of change occurred among 18-24 and 25-34 year olds throughout 2022, with both cohorts experiencing a slight increase in average credit scores of 0.7%. On the other hand, Australians aged over 65 saw no change in average credit scores across 2022.

A credit score is dynamic and can change with certain types of financial behaviour, including how well consumers have kept up with repayments, credit limits and negative events such as defaults, judgements and bankruptcies.

Director of Client Advisory, Charlotte Rankin, said:

“Credit scores fared surprisingly well in 2022 as Australians faced record-high inflation and increasing interest rates and cost of living. In theory this environment may increase the rate of missed payments and defaults, negatively impacting credit scores.”

“The fact that average credit scores were maintained, and for certain demographics slightly increased, indicates that Australians wisely adapted their financial behaviours to manage the challenging economic conditions. It also indicates Australians were able to draw on increased savings accumulated through lockdowns, with Commonwealth Bank data showing the median savings balance was 42% higher than pre-pandemic in February 2022.

“We’re not out of the woods yet though, as these economic challenges show no sign of slowing in 2023. Analysis drawn from our latest Risk Radar report found that 100% of risk experts surveyed say it’s likely or very likely that customers will experience increased levels of hardship and defaults in the next 12 months

“The good news is that hardship regulation introduced in July 2022 means that a framework is in place to manage the increased rates of hardship expected for the year ahead, while also safeguarding against any financial hardship arrangements impacting credit scores.

“For consumers, if they are facing hardship or struggling with repayments they should reach out to their bank or lender. Proactive and early conversations can make a huge impact on the long-term outcome and the hardship framework was introduced to ensure consumer protections in these circumstances.”

Download the last Risk Radar report for more insights.

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