Home Credit score Repayment holidays to hurt less as credit changes take effect

Repayment holidays to hurt less as credit changes take effect


Australian credit ratings are steadily recovering after being hit by the pandemic, and new regulations on July 1 should help them rebuild further.

Credit reports are consulted by lenders when reviewing loan applicants, and credit scores calculated from them are playing an increasingly important role in securing financing.

Credit ratings are recovering from a pandemic.Credit:

Monthly payment histories on loans and credit cards are included and late payments of more than 14 days on cards, personal loans and mortgages can appear as black marks on credit reports and negatively affect scores.

Major credit reporting agencies calculate credit scores differently. If a report is rated out of 1200, then a score above 850 is generally considered ‘excellent’ while above 660 is rated as ‘good’. If the report is rated out of 1000, above 690 is considered “excellent” and above 540 “good”.

Analysis of millions of credit reports held by the world’s largest credit bureaus, Experian, shows gradual improvement in demographics of all ages.

Australians aged 18 to 24, who have borne the brunt of the extended closures in hospitality and tourism in 2020 and 2021, continue to have the lowest average credit scores, at 734 out of 1,000. is 13% below the highest working age. group, 55-65 years old, which averaged 843.

Retirees, who are no longer dependent on employment income and who mostly own their homes, fare the best with an average score of 866.

The repayment holidays offered for free during the pandemic appear to have hurt the credit scores of many Australians. Besides the fact that loans with suspended repayment continue to earn interest, they have had an almost institution-by-institution impact on borrower scores.

However, Tristan Taylor, managing director of credit services at Experian, said changes to regulations mean that, for the first time, information about financial hardship agreements can now be reported to credit reporting agencies.