Easy loans put future borrowing on the line

EASY personal credit is causing problems for young adults, who are trashing their credit files and damaging their chances of borrowing money in the future.

More than half of 18 to 21year-olds do not know what a credit report is, according to research commissioned by Positive Lending Solutions.

Managing director Tom Caesar said it was a worrying trend that young people were creating poor credit histories.

“We are seeing too many of them with unpaid bills or credit card debts on their credit report, or they have gone bankrupt at 19 for an unpaid phone bill,” he said.

Positive Lending Solutions, a national finalist in last year’s Telstra Australian Business Awards, examined the credit habits of 5000 young people and found more than a quarter had made a late bill payment.

Lenders examine a person’s credit report when assessing their suitability for a loan, and a poor report can lead to much higher interest rates or refusal.

Credit reports also note how many times people apply for loans, so taking on new debt to pay old debt is not a good idea.

Rodney Michail, director of 1800Approved, said the popularity of online shopping and the ease of obtaining credit had led to problems for younger people, and many were ruining their credit score by making multiple loan applications.

“I recently had one young client who had applied for a loan online with four banks in one day and his credit score had suffered significantly,” he said.

“His lower credit score meant he was deemed high risk and therefore was potentially looking at an interest rate around 4 per cent higher than an applicant with a better score.”

Anyone can check their credit report for free using one of many online services. Simply search for “free credit report checks” but read the fine print.

Mr Caesar said people could improve their chances of getting a good loan deal by:

● Researching deals and advice online first.

● Showing lenders a history of being able to save at least some money every week or month.

● Having a deposit even if 100 per cent finance is offered.