By Nicola Field,
When it comes to debt management, it seems women have the edge over men. Separate studies by credit reference agencies Veda Advantage (formerly Baycorp Advantage) and Dun & Bradstreet (D&B) have found men are more likely to default (miss repayments) on their loans than women.
The Veda study looked at credit defaults between June 2002 and mid-2007, finding six out of 10 defaults were made by men. On almost every score, men outranked women, accounting for 62 percent of personal loan defaults, 62 percent of defaults on overdrafts and 56 percent of mortgage defaults.
According to Veda's Erica Hughes, "Women appear to be more reliable payers than men, although it's important to note that across this five-year period women applied for less credit."
This final point is noteworthy. Official statistics on debt levels of men compared to women are unavailable, but when it comes to personal debt like credit cards, men account for the majority (56 percent) of credit enquiries made by a lender when a customer applies for credit. While this implies men also take out more debt than women, D&B points out that couples sometimes apply for credit in the man's name only, boosting the number of credit enquiries for men.
Nonetheless, Christine Christian, CEO of D&B, says, "There is anecdotal evidence to suggest women are more diligent with their debts than men." But not on every score. When it comes to phone bills, D&B found more women default.
More worrying than any gender differences is that younger Australians seem to be struggling with credit. Veda says 45 percent of all debt defaults occur among people aged 18 to 30.
And the amounts getting us into trouble can be alarmingly low. Almost half (47 percent) of the outstanding debts referred to D&B for collection are below $400. D&B's Christine Christian says, "This small amount can have a very big impact on a person's ability to access affordable credit for major purchases like cars and property."
Debt defaults can be the start of a slippery slope ending in bankruptcy. Here too, men take the unenviable poll position. Veda says 54 percent of bankrupts are men and once again younger Australians are most at risk. The majority of bankrupts are aged 18 to 37 years.
Rising interest rates also make debt management a growing issue for us all. Veda's Erica Hughes explains, "Everyone needs to manage credit obligations in a consistent and responsible way to ensure their credit file, and therefore their financial future, isn't marred by defaults". Veda recommends:
- Think carefully about your credit commitments if you're likely to have trouble paying your phone bills, look at prepaid options.
- Organise an extension plan with credit providers if you can't make a repayment.
- Avoid multiple applications with different credit providers; this can reflect badly on your credit history.
For the complete story see Money Magazine's October 2007 issue. Subscribe now.