Consumers have been using savings to meet their credit commitments amidst the rising cost of living, but credit bureau Equifax has warned these buffers are disappearing.
 
Based on an analysis of more than two million credit scores, Equifax found that consumers had so far coped with higher interest rates, with the national average credit score rising from 846 last year (rated as ‘very good’) to 855 this year (rated ‘excellent’).
 
However, Equifax’s head of insights, Carrie Cheung, noted that the household saving ratio has been in sharp decline – this has fallen from 23.6% in June 2020 to 1.1% in September 2023, according to quarterly data from the Australian Bureau of Statistics.
 
“Using savings to manage the higher cash rates and increased cost of living has helped cushion many Australian consumers against recent economic turbulence, and has had a beneficial effect on their credit scores. But this cushion is shrinking rapidly and has already been exhausted for some,” she said.
 
Ms Cheung also noted that missed repayments are trending up among all age groups, while the share of income that households are devoting to loan and rent payments has “increased dramatically”.
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