Since the introduction of Comprehensive Credit Reporting (CCR) last year, many Australians are still unaware that missing credit card repayments can have a negative impact on their credit score and could prevent them from getting approved for more credit in the future.
Late or missed payments are now included on your credit file for up to 2 years as part of your “repayment history information” if your payment is over 14 days late.
If you’ve previously missed a credit card payment, here’s how your credit score could be impacted and what steps you can take to get yourself back on track.
Missed repayments & your credit score
Based on recent analysis conducted by our partner credit reporting body, Experian, missing a credit card payment for the first time could lead to a 22% decrease in your score, a 26% decrease if you miss 2 repayments, followed by a heavy 42% drop by missing 3 or more repayments in the last three months.
Under the CCR regime, a greater focus by lenders on your repayment habits could potentially impact your future applications for credit.
Limit the number of credit cards you hold
Experian’s research also shows that as the number of credit cards you hold increases, your credit score tends to drop. If you carry multiple credit cards, you could overextend yourself and ultimately result in missed repayments.
Higher credit card ownership and late credit card repayments = lower credit scores.
Consolidating multiple credit cards into a debt consolidation loan could be an option to help you better manage your credit and your monthly repayments.
Your credit management and repayment habits
Experian’s findings from a consumer research survey of 1,000 people revealed that keeping on top of credit card repayments is a current struggle for many Australians, with 2 out of 5 Australians unable to make their repayments because they either forgot or can’t afford to pay it off.
If you’re having issues managing your debts, speak to your lender as a priority and request for hardship assistance. Most lenders will be able to arrange more suitable payment terms or reduce the monthly repayment amount required to help with your financial situation.
Requests for hardship assistance does not affect your credit score and does not get reported on your credit report.
Demonstrating positive credit behaviour and repayment habits is now more important than ever. Even if you’re not planning on applying for credit in the future, it’s important to regularly assess the way you manage your finances and find ways to improve your financial position.
If you haven’t yet, sign up to Credit Savvy to track your Experian credit score and credit file information for free. See your past repayment history information and find out where you stand!
This article was originally published on Credit Savvy.