COVID-19 spurs rush to check credit scores

Data from Credit Savvy, which is part of x15ventures, the wholly owned fintech subsidiary of the Commonwealth Bank of Australia, showed that 614,000 people checked their credit score between March and August 2020.

This is a 36 per cent increase on the same period in 2019.

Commenting on the increased interest in credit scores, Credit Savvy managing director Leo Hillary attributed it to many people facing financial uncertainty amid mass lockdowns and job losses triggered by the coronavirus pandemic.

“With many Australians having to make the difficult decision to defer their loans, or make other adjustments to their finances, it is no wonder people wanted to know how this would affect them and their financial future,” Mr Hillary said.

“This will be essential as consumers tackle the ongoing effects of the pandemic in the coming months while building financial buffers to help them play their part in the country’s economic recovery.”

The data has come amid findings from comparison website Finder, which has reported that rising unemployment and wage cuts have led to consumers increasingly overdrawing on their credit cards.

A survey of 690 credit card holders found that 15 per cent of credit card holders have surpassed their limit during the pandemic, which is equivalent to more than 2.1 million borrowers.

The survey also found that while 8 per cent of card holders have paid their debt down under the credit limit, 7 per cent are still currently over.

Furthermore, more women (18 per cent) went over the limit on their credit card during the pandemic than men (13 per cent).

Almost a quarter, or 26 per cent, of Millennials were overdrawn on their credit card at some point during the pandemic, with 11 per cent still unable to resolve the issue.

Commenting on the survey findings, Kate Browne, personal finance expert at Finder, said the true scale of financial stress experienced by many adults due to the COVID-19 crisis has not yet been fully felt.

“In light of proposed changes to responsible lending laws, it will soon be easier than ever for Australians to access credit, which could mean some people accumulating more debt than they can handle,” Ms Browne said.

“The onus will be on borrowers to provide accurate information that shows their true ability to service a loan.”

Ms Browne encouraged borrowers who are struggling to make repayments to contact their bank immediately to discuss options available to them to get debt under control, including repayment plans.

“Missing payments not only adds to financial stress, but can also impact your credit score. Your credit score is your financial identity and is how lenders view you. If you are missing payments, your credit score and your financial credibility can be put at risk,” she said.

According to the Reserve Bank of Australia, the average credit card limit per borrower is $9,892, and there are just over 14 million credit cards in circulation.

Official data showed that credit card balances accruing interest dropped from $1,877 in February to $1,647 in June, but repayments against those interest-accruing balances dropped from 103 per cent in February to 89 per cent in May.

Credit Savvy launches two new features

Credit Savvy has announced the launch of two new features to coincide with the release of its data on credit scores, designed to help users understand their credit scores and how and why they can change, and how they can manage their finances.

The first feature, Credit Score Factors, provides Credit Savvy members with information on factors that could be influencing their credit score as well as opportunities for improvement. The factors are categorised into three types: helping, hurting and opportunity.

Those who have a negative event on their credit file such as a default or court judgement will have a “hurting” factor and be provided with tips on how they can demonstrate positive credit behaviour.

The credit score provider has also launched Financial Wellbeing, a measurement tool developed by the CBA and the University of Melbourne, which will help its members assess their overall financial wellbeing.

Users can complete a short survey on their current financial situation and obtain a financial wellbeing score between zero and 100 so they can determine whether they are financially “having trouble”, “just coping”, “getting by” or “doing great”.

Commenting on the launch of the features, Mr Hillary said: “We’ve always been focused on our members, helping them with their credit reputation.”

“Providing these new tools will help our members to understand their overall financial position in even more detail, which will be essential in working out their next steps during these challenging economic times.”

Credit Savvy, which was launched in 2015, became part of x15ventures in May 2020. Since launching, it has provided nearly 29 million free credit scores to users.

CBA customers can use its services through the CommBank app.

[Related: CBA-owned fintech launches home-buying app]