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Credit applications fall, defaults increase

Credit card and personal loan applications have fallen by 13 percent in the first three months of 2009 compared to the same time last year, according to Veda Advantage’s Consumer Credit Demand Index.

Rory Matthews, Veda Advantage CEO, said the significant decreases in credit card and personal loan enquiries are in line with expectations, as consumers shy away from these particular credit instruments and view property as an attractive investment.

“There is a trend for people looking into the viable property market given the abnormally low interest rates and the Government’s incentives for first home owners.”

Default rates for credit cards and personal loans have risen gradually in the first quarter of 2009, with the highest year-on-year monthly increase being reported in March.

Matthews said because defaults generally take three to six months to be recorded on your credit file, this may be indicative of a Christmas spending-spree hangover – as Australians struggle to repay debts from the Christmas period in December 2008.

In order to help struggling Australians and businesses reduce debt in tough economic times, Veda Advantage have formulated a RISK checklist.

1.    Review – carefully consider your strategy around credit commitments, and formulate a plan to meet payment deadlines, whether it’s mortgage repayments, credit cards, personal loans or your utilities, to understand and pre-empt what is going in and out of your bank account is important.

2.    Identify – isolate a clear understanding of what you owe each creditor, and work out a repayment plan. If you do have trouble repaying your loans and bills don’t be afraid to seek advice. Financial institutions may have programs to help you in times of trouble.

3.   Spend less – assess ways you can temporarily reduce unnecessary spending. Small measures and lifestyle changes such as catching public transport are not only good for the environment, but good for your finances too.

4.    Knowledge – have all the information at hand regarding your financial identity so that you will be prepared and familiar with the same financial documentation the bank or credit provider will take into consideration. Your credit file, available at www.mycreditfile.com.au, will give you up-to-date information on your credit history, and also help you maintain the security of your details. It’s what the banks receive when you apply for credit, so you should also be aware of your financial credit record.

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