Increased data sharing among lenders is helping first home buyers see the biggest boost in their perceived credit worthiness, despite also having some of the worst credit card repayment histories of all demographics.
This comes from new research by Australian credit bureau Experian, which analysed 9.2 million individual credit card holders and 14 million open credit cards across multiple lenders.
The research highlights how Australians are affected by the new comprehensive credit reporting (CCR) rules, which the big four banks and other lenders such as Citi and HSBC are now using.
According to the figures, 5.8% of first home buyers and young families in new homes across the country’s fastest growing suburbs have missed a credit card repayment in the last three months, which is more than twice as likely as the most affluent group of borrowers.
Despite being the potentially riskiest group of borrowers, the majority of first home buyers and young families are seeing a boost to their credit worthiness rating, with an average 4% jump in their credit scores now that lenders are sharing positive credit data.
The research additionally found those in the 18 to 25-year-old bracket will see the biggest increase in credit scores at 17%, followed by 25-35-year-olds at 5%.
The research shows the new positive data will help younger Australians, or those without a long credit history, build one more easily and quicker than before.
It also identified a correlation between the number of credit cards held by consumers and their credit scores, with scores tending to decrease as the number of cards increased.
It additionally revealed an individual with two credit cards is 54% more likely to miss a payment than those who only have one, a steady decline as the number of credit cards increase
Poli Konstantinidis, executive general manager, credit services and decision analytics Australia and New Zealand at Experian, warned that borrowers need to consider their credit cards when applying for finance.
He said, “Potential home buyers need to be aware that their credit card usage, including the number of cards they own, can now have an impact on their future home loan applications.
“Lenders are now able to see the number and type of credit accounts people have and whether they have been paying loans back on time, which helps them better evaluate who to provide credit to and lend more responsibly.”
First-time home buyer Gabby said, “In today’s landscape being able to buy a first home is no longer a guarantee, especially with cost of living steadily going up.
“With the boost in credit scores, I’m hopeful it will translate into more favourable home loan rates. As I have only recently opened a credit card account, this is an opportunity to build my credit file and in turn grow my credit score, improving my chances of purchasing my own home.”