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How COVID-19 has impacted Australian financial habits

Posted 17.10.2021
How COVID-19 has impacted Australian financial habits

The spending and borrowing habits of Australians nationally has drastically changed during Covid-19 lockdowns. Not only have Australians had to switch up their lifestyle but also have to consider their financial habits and how they spend their money significantly.

Based on information from ClearScore’s yearly analysis, we can begin to understand how loan repayment trends, financial habits and credit scores have been affected during COVID-19 in 2020 and 2021.

Key Australian Financial Habit Findings in 2020-2021

  • Active loan defaults are down by 21% and 30% fewer missed payments on loans have resulted in improved Credit Scores for every category.
  • Individuals with lower credit scores have seen the biggest improvement in credit scores, up over 100 points in the last 12 months
  • 60% of Australians have now opted to have more than one Buy Now Pay Later account for shopping online
  • A third of New South Wales residents have noted that their situation has worsened due to Covid-19 since July
  • Australians are open to using Open Banking as a new financial option for loans, borrowing and banking options.

What is a Credit Score?

Typically, a credit score is a number between 0 to 1000 that represents the creditworthiness of an individual. The calculation of a credit score is based on the credit reports of a consumer including payment history, credit enquiries and loans. In Australia, you can find your credit reports at ClearScore, Equifax, Experian, and Illion.

This score will place a consumer into a credit category and will determine their eligibility to access a loan or credit and the ease of this process.

  • Poor credit: 0-549
  • Below-average credit: 550 – 624
  • Fair credit: 625 – 699
  • Good credit: 700 – 799
  • Excellent credit: 800+

Simply, the higher the credit score of a consumer the more likely they will qualify for more financial products at a lower interest rate.

Improved Credit Scores Year-On-Year

Over the last year, Australians have seen an improvement in their credit scores due to reduced missed bill payments. This could be due to a multitude of factors including:

  • Government relief measures (Jobkeeper)
  • Cautious consumer spending and borrowing due to Covid-19
  • Statewide isolation lockdowns
  • Lower volume of enquiries for credit

Interestingly, consumers with lower credit scores have seen the most dramatic improvements over the last year.

Credit Score Category

Change In Average Credit Score

Poor (0-549) +128
Fair (550-624) +18
Good (625 – 699) +6
Very Good (700-799) -13
Excellent (800+) -19


The improvement in credit score can also be attributed to the past 12 months of Covid-19 lockdowns as Covid has put pressure on the financial habits of consumers. A decrease in spending and borrowing comes with a decreased chance of missed payments on loans and results in an improved credit score.

Specifically, one of the most common reasons for a poor credit score is a consumer having a default on a loan. During the last 12 months, there has been a reduction in loan defaults for all consumers but most notably  ‘Poor’ credit score classified consumers which has resulted in a greatly improved credit score for this category.

An important aspect to note here is that although ‘Poor’ credit score category consumers have seen an increase over the last year, their current financial situation (with the exception of credit reports) is not taken into account.

Covid-19 Lockdowns In Australia

The Covid-19 lockdowns have affected each state across Australia differently. However, the average credit score of consumers in New South Wales, Queensland, Victoria, South Australia and Western Australia have all increased by at least 18 points.


Average Credit Score Increase

Victoria +24
South Australia +24
Western Australia +24
Queensland +23
NSW +18


Although this may look positive, Australians nationwide have found the most recent lockdowns extremely financially tough.

  • Australian’s have become more concerned regarding their finances with 27% of consumers noting their finances have gotten worse
  • 34% of NSW residents feel their finances have been negatively impacted during the latest lockdowns
  • Job data shared by the NSW Department of the Treasury in September found that more than 100,000 people were on zero hours as a result of lockdown and 64,000 people left the workforce in August.
  • Heavier lockdowns in concentrated Local Government areas have negatively impacted residents in specific ‘Areas of Concern’ with the level worsening in higher lockdown LGAs.

Lockdowns across Australia have not greatly impacted the unemployment rate in Australia, however, lockdowns are wreaking havoc on the current economy. As Australians struggle with their finances, a high credit score may be the only thing keeping them afloat.

Variations by Credit Score

A credit score band or category is also an indicator of how much Covid-19 is impacting different groups. Consumers with the lowest scores are more likely to experience a negative impact on their finances than those with the best credit scores as they usually have less disposable income.

  • Excellent credit score consumers (800-1000): 20% of Australian consumers insist that the most recent lockdown has negatively impacted their finances.
  • Below Average (550-624) and Poor (0-549): one-third of Australian consumers insist that the most recent lockdown has negatively impacted their finances.

Consumers in the lowest credit score band are more susceptible to financial fluctuations and can struggle to make payments for credit on time while higher credit score band individuals are the opposite. This is another reason why Covid-19 has assisted some lower band consumers who have seen their credit score rise as they have become more frugal with their finances.

Buy Now Pay Later Options In Covid-19

Buy Now, Pay Later (BNPL) options have now become extremely popular amongst consumers as this may be the only option for them to buy products online. This is another major development for consumer habits as BNPL has become a lifeline for many during the financial stress of Covid-19.

The Buy Now Pay Later option has been a great help to consumers during Covid-19 as these credit options are not regulated as consumer credit and almost anyone can get credit on a BNPL. This has resulted in consumers with a lower credit score and income, who were shut out of getting access to loans and credit cards, finally having access to funds during challenging Covid-19 conditions.

The recent explosion of BNPL has resulted in many retailers partnering with different providers meaning that many consumers have more than one BNPL account. This also allows consumers to spread their spending and borrowing habits across multiple options, although it can become tricky when assessing multiple credit payments.

What is Open Banking?

Open Banking has been launched in Australia during the Covid-19 pandemic with the promise to provide Australians with access to better financial deals. The process involves sharing your banking data (including mortgage, credit card, saving and personal loan information) with third parties to get better-suited banking products or switch your current bank with ease.

Australians are still relatively new to the concept of Open Banking with 12% of ClearScore users being aware of what Open Banking was according to their survey in September 2021. However, once these respondents had knowledge of these options, just over half (56%) said that they would give Open Banking access to allow their income to be verified for the purpose of applying for loans.

Australians are willing to experiment with Open Banking across every state to varying degrees. However, one of the biggest differences in willingness to share data was based on credit score band. This is because consumers who are not able to access credit easily are much more likely to share bank data to get a loan. This is perfect for consumers who are struggling to get on their feet without financial assistance and who need a loan for financial stability in trying times such as Covid-19.