2.3 million Aussies risk financial trouble

More could be at risk, if interest rates begin to rise

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published October 1, 2013 10:33 am AEST

Credit bureau Veda estimates that more than 2.3 million Australians are at risk of financial strife in the next 12 months.

27% of those are at high risk of credit default from something as simple as an unpaid bill, credit card or loan, according to data compiled by Veda. The numbers are based on the 15 million plus Australians who are credit active.

And our youngest Australians are the most risky, with 23% of generation Y's leading the pack for credit default risk, followed by generation Xers at 16% with Baby Boomers at a lowly 8%. Veda says this is most concerning, given Gen Ys are those most likely to seek credit in the future for a home, car or big household purchases. Gen Ys are generally those with birth dates beginning in the early 1980s to the early 2000s, with generation X usually born between the early 1960s to early 80s, while baby boomers are those born before the 60s.

"Many people don't know what's on their credit report or that utility and telco applications or defaults may be recorded on their credit file. Lenders like banks, telcos and utilities may use a person's credit history and VedaScore when assessing credit applications," said Belinda Diprose, Veda marketing manager.

Applying for a mobile telephone plan through the likes of Telstra Corporation (ASX: TLS), Optus – owned by Singapore Telecommunications (ASX: SGT) can mean a check of a person's credit history. And utilities providers such as Origin Energy (ASX: ORG) and AGL Energy (ASX: AGK) could knock back a consumer's request for power, if their credit profile shows a history of defaults or outstanding debts.

Veda says around 80% of people have never accessed their credit report, and many Australians misunderstood exactly what their credit report records, including unsuccessful credit applications.

Foolish takeaway

With markets pricing in a 100% chance of an interest rate rise before 2015, more Australians could be at risk of defaulting. Now may be the time to get those unpaid bills paid and to check your credit report health.

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Motley Fool writer/analyst Mike King owns shares in Telstra.

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