Your credit report is a history of borrowing and other personal and financial information kept by credit reporting agencies. Your credit score boils all this information down into a single number that represents your reputation or quality as a borrower - the higher the score the better.
Lenders use your credit score to profile you as a borrower and help decide whether to lend you money and what to charge if they do. Credit scores range from 0 to 1,000 or 1,200, with 1,000 and 1,200 being excellent scores.
If you’ve never made a credit enquiry or held a utility account you may not have a credit report or credit score.
Luckily, most lenders will still lend to you if you don’t have a credit score. The best way to improve your score is to apply for credit, utility accounts or credit cards and make regular, on-time repayments.
Checking your own credit score will not affect it. However, if you apply for credit and lenders check your credit score that may negatively affect it.
If after checking your credit report you find inaccuracies or double listings contact the relevant credit provider to request that the listing be removed or amended.
If the credit provider refuses you can submit a request to have the listing removed with the credit reporting agency.
You can check your credit score for free with an online credit agency:
To get your score you may have to sign up and provide an email address and a password. Once you’ve got an account you will need to provide further details like your:
There’s no need to pay to access your credit score so avoid providers who ask for credit card details.
Your credit score takes into account personal information, information on your borrowing and credit applications and details of your business interests.
That includes how often you move house, repayment history and any current credit. That information is then boiled down into a single number.
Positive events increase the number while negative events will decrease it.
Credit scores are split into five ranges, from low to excellent. Each of the three main credit rating agencies in Australia uses slightly different ranges for credit scores.
|Credit score||Experian||Equifax||Credit Simple|
The range that your credit score falls into could affect your ability to secure loans, credit cards and other forms of finance. Here’s an example of what each range means:
An excellent credit score shows lenders that you have a strong credit history. You should be able to access credit easily, including the best interest rates and favourable loan terms. You may even be able to ask for discounted fees or negotiate better interest rates with your current lender.
Provided you are able to make repayments you should be able to secure finance easily with a very good credit score. You may not get rates as good as those with an excellent credit score.
An average score may mean higher rates and stricter terms than very good and excellent scores, but in most cases, you should still be able to secure finance.
A fair credit score may affect your ability to secure finance. Lenders may offer you higher interest rates and look very closely at your finances to ensure you have the ability to make repayments.
A low credit score indicates to lenders that you have bankruptcies, defaults or other negative events in your credit history. Traditional lenders may deny your applications for finance or charge you higher interest rates.
In most cases, you’ll still be able to borrow money if you have a bad credit score but lenders may charge you higher interest rates and fees. If your credit score is very bad you may only be able to borrow from a lender who specialises in bad credit loans.
Your credit report includes a number of personal and financial details:
CCR, or Comprehensive Credit Reporting, is a new credit reporting system that was introduced in 2018.
The updated system shows positive credit actions as well as negative ones, meaning lenders are able to see if you’ve been making repayments on time or settling debts. These actions have a positive effect on your credit score.
What’s more, CCR gives borrowers more power over their credit scores requiring that lenders and credit reporting agencies:
Each of the items listed above will have either a negative or positive effect on your credit score. Here’s an example of how certain actions could affect yours:
|Decrease your credit score (bad)||Increase your credit score (good)|
Late payments and/or defaults
Consistently making debt repayments on time over a long period of time
Applying for credit cards, loans and other forms of finance too frequently.
Paying your bills on time
Paying bills over $150 late by 60 days or more (e.g. power or internet bills)
Having a credit limit higher than your credit balance
Court writs against you for financial matters
Paying off debt loans and credit cards.
Bankruptcies that were within the last five years and/or bankruptcies that ended within the last two years
Having a bad credit score isn’t the end of the world but it can make securing credit more difficult. Here’s how it could affect you:
If lenders deny your applications you may still be able to access credit with lenders who specialise in bad credit loans. However, these often have much higher interest rates and fees than other products on the market.
If you have a bad credit score you may be able to improve it over time by taking a few simple steps. Here’s what you can do:
Your credit score boils your financial and borrowing history down into a single number that lenders use to profile you as a borrower.
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