Despite maintaining a stable job and residence, one client found themselves with a credit score of 420, significantly below the typically considered good score of 661 or higher. Surprisingly, their low score resulted not from missed payments but from the utilisation of easy credit options for major purchases.

Utilising interest-free loans and credit facilities for essential items such as a mobile phone, solar panels, and home appliances, they unknowingly impacted her credit score. Even their seemingly innocuous purchases using Afterpay and ZipPay for smaller transactions had repercussions when they decided to buy a car, discovering interest rates of around 15% due to their diminished credit score.

The ease of obtaining credit through interest-free loans and flexible payment options creates a false sense of security. While these services offer immediate benefits, the impact on credit scores is often underestimated. Credit scores are influenced not only by repayment capability but also by factors like the type of credit used and the diversity of one's credit portfolio.

This client's experience underscores the critical need for financial literacy in Australia. As consumers, it is essential to proactively understand how financial decisions can impact credit scores. Even seemingly innocuous choices can have far-reaching effects, emphasising the importance of building a comprehensive understanding of credit and its nuances.

For our client, the journey to improve their credit score involves engaging in open conversations with us as their mortgage broker to understand the types of finance available and their impact on credit scores. Actively working to reduce their credit portfolio by opting for interest-free credit cards, they aim to strike a balance between leveraging convenient credit options and maintaining a healthy credit profile.