The impact of missing a credit card repayment

By Duffie Osental

Two out of five Australian consumers say they are unable to make their credit card repayments on time – and an overwhelming majority don’t know how much missing repayments will affect their credit score.

A survey from credit bureau Experian revealed that 42% of respondents said they are unable to make repayments on time. Almost half (48%) of respondents said they forgot and missed their due date while 44% couldn’t afford to pay it off – and over a quarter (28%) could only afford to pay off a portion of the minimum sum.

The research also revealed 97% of Australians are not aware how much missed credit card repayments impact their credit score in the new Comprehensive Credit Reporting (CCR) environment. Worryingly, 42% of consumers incorrectly believed their credit score would only decrease minimally (by 1% to 5%) after one missed credit card repayment, and a fifth (22%) of respondents admitted they didn’t realise the way they managed their credit card repayments could potentially impact their future credit applications.

A recent analysis of 9.4 million individual credit card holders and over 14 million open credit cards in Experian’s credit bureau data showed that, for those consumers who are up to date with credit card repayments, credit scores will drop by as much as 22% following just one missed credit card repayment in the last three months. The drop increases to 26% with two missed credit card repayments and a whopping 42% for those with three or more missed credit card repayments in the last three months.

“It is crucial now more than ever that Australians are aware of how their credit card repayment habits may affect their credit score,” said Poli Konstantinidis, executive general manager of credit services and decision analytics for ANZ at Experian. “One missed credit card repayment may seem insignificant; however, it has great potential to impact applications for credit. With banks now utilising comprehensive data to inform their lending decisions, and the breadth of this data set to expand in the coming 12 to 18months, the way you use your credit cards impacts your credit worthiness and in turn is part of what you’re assessed on when applying for credit.”

Konstantinidis stressed the importance of consistent and timely repayments to avoid problems securing credit in the future.

“Keeping track of your financial situation and rectifying any lapse of payments as soon as possible to help recover your credit score would be my recommendation for any Australians concerned,” he said. “Remaining consistent and timely with repayments as well as checking your credit score regularly to make sure there is no negative information on your report will place you in a better stead when applying for credit.”

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