Consumers start to take an interest in credit scoring

Dirk Hofman believes Australians are starting to take an interest in their credit scores. Hofman is the managing director of Credit Savvy, which offers consumers free credit scores.

Hofman said that, since the business started in March, "tens of thousands of people" have visited the website. However, he said there was a long way to go before Australians took the same interest in their credit scores as consumers in other markets.

Credit Savvy is owned by Aussie Home Loans and works in partnership with the credit reporting agency Experian. As well as getting a free credit score, consumers can sign up for free monthly updates, a credit file monitoring service, security alerts and information about the management of personal finance.

This week the company released some Experian data, showing that people aged 18 to 24 have the lowest average credit score at 564 (out of 1000). People aged 25 to 34 have an average score of 610.

The national average is 649. People over age 55 have the highest average score at 735.

"What we tell young people who come on the site is to pay their bills on time, stay away from payday lenders and don't apply for too many credit cards," Hofman said.

"They don't understand what makes them high risk from a credit providers point of view.

"They also don't understand that data that goes into their credit report or credit score stays there for years. Our aim is to show people that managing their credit scores is a long-term job."

Earlier this year Experian released the results of a survey, which showed that 80 per cent of Australians have never accessed a credit report and only seven per cent requested a credit report over the past six months.

Thirty-four per cent said they didn't know what a credit report was and 77 per cent didn't know how credit scores were used by credit providers to assess creditworthiness. Only 18 per cent knew about the comprehensive credit reporting changes.

Credit Savvy also offers a product comparison service but Hofman said that part of the business was still being established.

The business strategy is to link consumers' credit scores to their search responses. For example, a person with a certain score would be more likely to qualify for some products and less likely to qualify for others.

Such an approach would provide better targeted responses for consumers and be a more efficient source of leads for product providers.