A credit expert has shared one of the most widespread ways Australians are currently harming their credit records, lessening how much they can borrow and making it nearly impossible to access the record low interest rates on offer.
Victoria Coster, CEO of Credit Fix Solutions, issued the warning around buy now, pay later services off the back of the “dramatic increase” in the number of queries her firm has received over the third quarter of 2020.
“We are finding more and more that many consumers have poor credit because they are using ZipPay and AfterPay. Most people don’t realise that they are destroying their credit reports by using these types of services, which make consumers look desperate and high-risk to the banks,” she explained.
Concerningly, the total amount of credit extended by such services has nearly doubled in the past 12 months according to a report from the Australian Securities and Investments Commission (ASIC) released last month.
Further, it was found that one in five consumers are not making their repayments, with missed payment fee revenue for all such buy now, pay later providers included in the review totalling over $43 million – a near 40% increase from the previous year.
“Now more than ever, consumers are focusing their attention on how to secure a record interest rate – and having strong credit is one of the most effective ways to do this,” Coster said.
“It is now harder to get first-tier lender approvals if you have even the tiniest blemish on a credit report.”
Coster reiterated that while buy now, pay later arrangements may be promoted as a budgeting tool and are a tempting way to make purchases attainable that otherwise wouldn’t be, missing payments will not only result in consumers paying extra fees, but will ultimately make lenders less likely to issue a loan to the party in question.