A report out today warns that more than two million Australians risk defaulting on their basic household debts over the next year.
According to an annual scorecard from the credit reference agency Veda, the bills in the too hard basket include small ones for gas, electricity and mobile phones.
The study also says half a million people have jeopardised their credit-worthiness by lying or intentionally omitting information from the credit applications.
The warning comes amid speculation that the Reserve Bank might introduce tighter lending controls to protect investors from rising interest rates and falling property values.
Economists warn that any associated rise in unemployment could see some overly-indebted borrowers defaulting on their mortgage repayments.
However, Veda spokesman Belinda Diprose says mortgage defaults are not yet problematic and the primary default risk relates to unpaid utility bills, credit cards or personal loans.
"It's those easy to miss bills that come up first - telco bills, utility bills - and then they'll move on to credit cards, personal loans and usually it’s the mortgage that's the last one to go," Ms Diprose said.
The Veda report singles out Generation Y Australians - those born in the 1980s - as having the worst scorecard, despite being the most financially ambitious.
The study found that 22 percent of Gen Ys are likely to overspend to maintain lifestyles they can't afford and are "keeping up with the Joneses".
"They have this real fear of missing out. They're quite an ambitious group of people and they are not afraid to use credit to fund their lifestyles and to fund their goals," Ms Diprose said.
"One of the key things they need to understand is that if they do default it can really impact their ability to get credit in the future," Ms Diprose said.
However, the Veda study says slightly older Australians - Generation X - are at most risk from damaging their credit profile through late bill payments.
"Gen Xers are those who at the moment have young families and it's really hard to keep up with the daily pressures of bills for childcare and things like that," Ms Diprose said.
"So it's really important for people to understand what's on their credit history, what they can do to influence it and how it can impact them down the track when they really do need to get access to credit."
The scorecard also warns that the 500,000 Australians who have lied about their credit history need to be aware of new privacy rules where financial institutions can now view both positive and negative credit behaviour.
"It's certainly fraud. But as part of the new comprehensive credit reporting laws there's more information available for banks and lenders when they're assessing you on your credit application," Ms Diprose said.
"So if you omit for example that you have three credit cards and you only put two on it, they can see that information so it's probably best to tell the truth on your application form."